Netflix Is Being Underestimated by Wall Street

When Netflix (NFLX) went public in 2002 the notion that it would one day come any where near 100 million subscribers in the U.S. may have seemed like an impossibility.

But, with original programming budgets that rival (and sometimes top) traditional studios like Metro-Goldwyn-Mayer Studios Inc., Viacom Inc.’s (VIA.B) Paramount and Comcast (CMCSA) Universal Studios, and the age of cord-cutting sweeping the nation, that dream of a massive U.S. subscriber network seems to be upon us, at least according to one Wall Street firm.

Netflix hit 50.85 million domestic subscribers in the most recent quarter, which means it could exceed 60 million subscribers sooner than expected, or according to MKM Partners analyst Rob Sanderson. There is even the possibility that Reed Hastings media company could reach the high-end of the 60 million to 90 million goal it has maintained since 2012 despite skepticism from some on Wall Street.

“We think the outer boundary is more plausible than most investors believe,” Sanderson explained.

Sanderson raised his price target to $195 from $175, citing optimism over its broad market appeal and potential for domestic subscriber growth that will translate to an even bigger budget for original content production. Netflix has said it will spend $6 billion on original content in 2017. Sanderson estimates that Netflix will trade at $273 per share by 2020, based on a forward price to earnings multiple of 22.5 times.

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