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Netflix stock could double to $200 over the next three years, according to Mark Mahaney, the lead internet analyst at RBC Capital Markets.
“Amongst the FANG names, this is the one that’s most underperformed,” he told CNBC on Thursday, referring to Facebook, Amazon, Netflix, and Google.
Why is Mahaney so bullish on Netflix?
The increase in stock price would roughly correlate to subscriber growth, Mahaney said. “We think it’s going to double to be 150 to 160 million [global] subscribers in a couple of years.”
Wall Street has been split on Netflix. Much of the controversy revolves around subscriber growth, both in the US and internationally. Netflix missed badly on Wall Street expectations for the second quarter, but boosters like RBC argue that this is a hiccup and that Netflix’s potential is still intact.
The future of TV is Netflix
Mahaney says TV will evolve dramatically over the next decade. He told CNBC he thought the big bundle of channels, a staple of cable and satellite, will move toward a series of “mini-bundles” that people will buy for lower prices. Think a handful of Netflix-like $9.99 services instead of a $100-plus cable package.
“I think one of those five mini-bundles in the future will be Netflix,” he said. That’s a recipe for big subscriber growth.
And beyond subscriber numbers, RBC also thinks Netflix’s international profitability is coming along nicely. Earlier this month, RBC analysts pointed out something they thought many investors were missing about Netflix: Its international ramp-up was, in profitability, looking similar to Netflix’s rise in the US in 2012 and 2013.
Not everyone agrees
Other analysts are less sure about Netflix’s international future. Macquarie hit Netflix with a “Sell” rating earlier this month.
“We believe success will require partnering with local content providers and/or investing in more local content, or in content that will travel,” the analysts wrote. “This will be expensive – indeed, Netflix’s total content obligations have ballooned to $16-18 billion including ‘unknown’ off-balance sheet commitments, and could well rise further.”
Macquarie thinks Netflix will still be a success but might be even more expensive than anticipated.
Still, Mahaney thinks Netflix can “generate $10 in earnings [per share], GAAP earnings, by 2020.” In 2015, Netflix’s earnings per share totaled $0.28.