Forget the stream, many on Wall Street expect the growth of Reed Hastings’ Netflix to continue to flow like a raging river.
The company, which in one survey leapfrogged over YouTube to become the leading online video site, is expected to announce on Monday it added about 3.85 million subscribers globally — a 26 percent gain over the year-earlier period.
The estimates of continued solid growth, coming in reports from two Wall Street analysts on Thursday, pushed Netflix shares ahead 4.3 percent, to $345.74.
One analyst, Mark Mahaney, at RBC Capital Markets, thinks the Los Gatos, Calif., company, whose stock is off 18 percent over the past month, will continue to soar.
Mahaney’s Thursday report slapped a $500-a-share price target on Netflix stock.
Andy Hargreaves at Pacific Crest is equally bullish on Netflix.
“This is a business that can grow really, really significantly over the next couple of years,” Hargreaves told investors Thursday.
The bulls see a host of factors playing into a continued price rise:
♦ International usage is growing. A UK report out Thursday claims Netflix is the top online video subscription service in the nation, with 14 percent of the UK’s online population counting themselves as subscribers.
That’s up from 10 percent in November, thanks to its inclusion in Virgin Media’s TiVo platform, which makes turning on Netflix as simple as flipping the channel.
Amazon’s LoveFilm fell from 8 percent to 6 percent over the same period.
“Netflix has some opportunities ahead that will make the [$500] not such a big milestone,” said one executive who is familiar with the company.
♦ Subscriber rolls continue to grow.
Few expected Netflix to keep US subscriber rolls on an upward trajectory, but the endless arrival of new mobile devices, such as Amazon Fire, helps Netflix connect with new customers.
Mahaney is penciling in 2.25 million net new US streaming subscribers and 1.6 million internationally.
♦ Original programming is keeping customers around and lowering churn rates.
Mahaney notes 3.2 million subscribers rated “House of Cards” with 4.5 stars out of a possible 5. The reboot of “Arrested Development” drew ratings from some 8 million customer reviews.
♦ Increased mobile usage. Mobile monthly visitors to the Netflix site grew 56 percent in the first quarter, Mahaney estimates. Netflix’s average desktop unique visitors declined 3 percent in the first quarter versus a 30 percent drop for Hulu, according to ComScore data.
Of course Netflix isn’t immune to some bear case scenarios.
The American Association of Individual Investors released a survey Thursday showing 60 percent of respondents believe momentum stocks — including Netflix and Facebook — are overvalued.
Wedbush Partner’s Michael Pachter is highly skeptical of the $500 target. His target is a bearish $175 per share.
“Netflix is in the pincers of the content providers and the Internet service providers,” Pachter said. “They’re both looking to extract every penny of economic value.”