Ryvicker Initiates Netflix Coverage at ‘Outperform’

Wolfe Research managing director Marci Ryvicker initiated coverage of Netflix on Thursday with an “outperform” rating and a $442 price target, adding that despite fears new streaming video offerings from top programmers could cut into its business, the SVOD pioneer should still dominate.

Netflix stock was priced at $366.31 each in afternoon trading June 20, up about 1% each.

Netflix already has about 150 million subscribers globally and Ryvicker expects the company’s reach to double that number -- representing about 36% of the estimated 850 million available broadband homes worldwide -- by 2024. Add to that Netflix’s strong global brand awareness, the integration of its apps on most pay TV set-tops and that it is perhaps the biggest beneficiary of cord-cutting trends and Ryvicker believes Netflix will be able to surmount any hurdles associated with a recent price increase.

“With its breadth and depth of quality content, we anticipate sustainable pricing power,” Ryvicker wrote in a note to clients, adding she anticipates Netflix will generate positive free cash flow by 2022.

While the November launch of Disney+ is expected to attract customers, Ryvicker believes the two services can live together harmoniously. If that is not the case, she added Netflix has the wherewithal to survive. Her two worst case scenarios: 1) that Netflix never adds another U.S. subscriber after Q1 2020, would result in the stock dropping just 12% to $340 per share; and 2) that one-third of Disney+ customers drop Netflix, would make the stock fall to $241 per share, still above the low-end of its 52-week range of $231 to $423 per share.