On the basis of fundamental investing, Netflix remains a mystery. The stock is up 104% this year, to a recent $391, and 161% in the past 12 months. Almost 60% of 42 analysts covering the company have a Buy rating, even though the stock has blown right past the average price target of $354. Netflix trades at 137 times earnings-per-share estimates for 2018.
To make sense of investor enthusiasm, Bernstein media analyst Todd Juenger addressed one of the mysteries surrounding Netflix: “Seemingly everyone we encounter, be it professionally or personally, seems to already have access to a Netflix subscription. Yet, Netflix ‘only’ has 57 million paying U.S. subscribers.” Who doesn’t yet subscribe to Netflix?
Juenger commissioned a 1,000-person survey to try to get an answer. Based on responses, he estimates that Netflix has 141 million users, 68% of whom pay for the service. For nonpayers, the most frequent benefactor is another household member. He found that 82% of U.S. respondents ages 30 to 49 had access to Netflix, versus 44% of those 50 to 64, and 26% of 65 or older.
If the more youthful trend holds as viewers age, Netflix would pick up 17 million new subscribers in the 50 to 64 range and six million in the over-65 set. Those 23 million additions would eventually get Netflix near the top end of its long-term U.S. subscriber guidance of 60 million to 90 million. Juenger’s current forecast puts Netflix at 87 million U.S. subscriptions in 2030. He reminds clients that U.S. cable and satellite-TV subs peaked at 100 million.