Stifel Nicolaus analysts believe that Netflix, Inc. (NASDAQ:NFLX) is on its way towards achieving a market capitalization of $100 Billion in the next few years.
So far this year the company has been able to double its market capital to $41 billion. Therefore, the idea that it might reach a market capital of $100 billion is not farfetched. The firm has been experiencing constant growth for quite a considerable duration of time. The growth has mainly been as a result of its expansion plans as well as the introduction of new services to boost its performance. The company has also been venturing into its own productions for example producing its own programs through its studios.
Netflix has also maintained affordable subscription fees at an average of $9 per customer. To achieve the new goal, the content streaming company wants to raise the number of subscribers to 150 million in the next five years. This seems highly likely because it is still in line with the plan to introduce its services to more countries in the future.
Given an average pricing of $10 per customer, Netflix can achieve a 30% operating margin compared to the 23% operating margin achieved at $9 per client. A 30% operating margin would translate into $5.4 billion of operating income. In 2014, the firm managed to achieve $403 million in operating income.
The analysts suggest that the new projections would raise the stock almost to $230 ahead of the 7-for-1 stock split that is scheduled for next week. This will easily translate into a $100 billion market capitalization. If the company leverages its growing customer base through worldwide expansions and global licensing agreements, then achieving the target is highly probable. Netflix, Inc. (NASDAQ:NFLX) expects the rate at which new customers are coming on board to decline especially towards the third quarter. The company is however not worried about the competition.
The firm still expects growth to continue. Netflix shares rose by 1.9% to $682.56 on Friday.