Analyst raises forecast for Netflix subscribers, revenue per sub

Jeff Wlodarczak, principal and senior analyst at Pivotal Research Group, has put out a bullish new report on Netflix that forecasts more subscriber growth and higher average revenue per subscriber.

Wlodarczak also boosted his target price for Netflix stock by $65 to $765 a share — among the highest estimates on Wall Street.

“Our positive investment view remains unchanged,“ he said. “Netflix has won the streaming wars and their continued strong subscriber/ARPU [average revenue per user] and free cash flow generation should drive the shares higher.”

Wlodarczak said he expected Netflix to add 19.5 million subscribers this year, up from a previous estimate of 18.2 million. That would bring total Netflix subscribers to 356 million.
He forecasts ARPU to hit $14.37 per subscriber, up from $14.15.

“We expect another solid result in 1Q as Netflix highlights its ability to grow even while taking material price increases,” Wlodarczak said.

“Netflix continues to be a strong absolute and relative value to its video entertainment peers for consumers, which combined with a strong content slate, the positive effects of ad-supported and its competition (mostly) pulling back on content availability (and benefits from former piracy monetization) sets Netflix to continue to generate solid subscriber growth.”

Wlodarczak wasn’t as bullish on other streamers.

“We believe other streaming players/media players will have no choice but to continue to sell their premium library content to Netflix to offset their own poor returns in streaming (and to tap into NFLX’s approximately 800 million global viewers.”

Working with Netflix helps other media companies increase the value of their content. For example, Suits became a bigger hit when it started streaming on Netflix. And the release of the film Dune 2 got a boost when the first Dune film streamed on the platform.

Access to other media companies’ premium content “enhances the value of Netflix’s service, allowing them to drive higher subscriber growth, reduce churn and increase ARPU,” he said. MSN