Netflix Could Be Worth Up To $750 Per Share In 3 Years, Says RBC's Mahaney

Netflix, Inc. NFLX shares should at the very least trade at $450 within three years — and could trade as high as $750, according to RBC Capital Markets. 

The Analyst

RBC Capital Markets' Mark Mahaney maintains an Outperform rating on Netflix with an unchanged $360 price target.

The Thesis

Here are some of the key findings from RBC's 27th quarterly survey of both U.S. and European consumers.

American Consumers 

• Penetration reached 55 percent in the second quarter, a record high.
• A total of 68 percent of Netflix users are "very satisfied" or "extremely satisfied' with the service.
• Eighty-eight percent of Netflix users said they are "not at all likely" or "slightly likely" to cancel their membership in the next three months.
• Only 7 percent of Netflix users said content has "worsened" from a year ago.

French, German Consumers 

• 52 percent and 47 percent, respectively, of French/German respondents are "extremely" or "very likely" to pay for any form of video content.
• 37 percent and 35 percent of French/German respondents use Netflix, versus 21 percent and 17 percent in May.
• A record 93 percent and 90 percent of French/German respondents are "extremely" or "very" satisfied.
• The churn rates of 61 percent and 65 percent among French/German respondents marks a decline from prior surveys.

A Revised 2022 Outlook 

Based on the encouraging survey findings, Mahaney is now modeling the following for 2022: 

• Total global subscribers of 235-265 million against a prior estimate of 220-250 million. 
• Average revenue per user of $12-14 versus $10.50 today.
• An operating margin of 25-30 percent, with the U.S. operating margin forecast to surpass 25 percent in fiscal 2019.
• EPS of $18 to $25 against a prior estimate of $14 to $22. 
• Applying a 25x-30x multiple yields a three-year potential range per share of $450 to $750.

Price Action

Netflix shares were trading higher by 1.73 percent at $357.49 at the time of publication Friday. 

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Photo courtesy of Netflix.