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To Infinity and Beyond: Morgan Stanley raises Netflix target price
Analysts at Morgan Stanley reiterated their 'overweight' recommendation on Netflix following the video streaming giant's latest quarterly update, lifting their target price on the stock to $275 in the process.
On the previous evening, the company announced a bigger-than-expected 8m increase in net subscriber additions for the three months to December to reach approximately 24m, even as it raised its prices.
Just as important, the investment bank said, viewing time per Netflix member jumped 9% in 2017, despite an already comparatively high base given how each member was, on average, already consuming approximately two hours' worth of content each day.
Because most of the growth in net adds was being recorded in its younger markets, where viewership was lower, then implicitly those two data points showed that it was the more mature markets such as the US, Canada and UK that were recording the fastest growth in viewership, Morgan Stanley said.
Thus, Netflix had become the most watched "network" in a typical Netflix home.
"Double digit growth in engagement suggests continued opportunity for strong member growth even in mature markets. Churn is directly related to engagement, suggesting that this growth in engagement in mature markets will drive down churn and liftnet additions," Morgan Stanley said.
On the back of all of the above, Morgan Stanley revised its forecast for the company's rate of net subscriber adds in 2018 from 21m to 23m, projecting that the total number of subscribers to its streaming services globally would rise to over 260m by 2025, excluding China.
Before the opening bell, shares of Netflix were jumping 11.19% to $253.04, having hit a 52-week high the day before at $227.58.