How Netflix Can Hit $160 Even If China Turns Out To Be A Dud

Guggenheim analyst Michael Morris initiated a coverage on Netflix, Inc. NFLX this week with a Buy rating and $160 price target. Morris was on CNBC to discuss the reasons behind his bullishness on the stock.

Great Bargain

"We just look at this company that we expect to be the global leader in television content and distribution over the next decade and at a $50 billion market capitalization right now, we still see it as a great bargain," Morris said. "And we think that at our target of about $75 billion market capitalization we see the risk and reward in the model is fairly balanced."

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China Is Just An Optionality

Morris was asked if he has taken into account Netflix's expansion into China next year in his model. He replied, "I look at the market in China and frankly I don't have a lot of expectation in my model for that market. I look at it as optionality and I think that you look at the challenges that other companies have had breaking into the Chinese market.

"And I think if you start depending on that for future of the business then you're really layering in a lot of risks. But I look at the global market outside of China. This is a company that expects to have its global footprint completely rolled out next year."

"It's in less than 5 percent of broadband homes outside of the US right now and that broadband market is currently four times bigger than the U.S. market and will continue to grow at a higher rate. I just see a lot of runway even before you start talking about that potential opportunity in China," Morris concluded.