Netflix, Inc. (NFLX) Looking to Further Penetrate Into European Households; RBC Sets $600 Price Target

After the success in the US, Latin America and the UK, Netflix, Inc.(NASDAQ:NFLX) is looking to expand into Germany, France and other European markets. Mark Mahaney of RBC Capital Markets told CNBC that this is certainly the right play for the company while his firm remains bullish on the stock giving it an ‘Outperform’ rating and a price target of $600.


  “[…] they [Netflix, Inc.(NASDAQ:NFLX)] are 15% penetrated amongst all the broadband households across Latin America, the UK, the Nordics, so the stronger than people realize and then we continued to do surveys both in the US and UK, their two largest markets, we see turn rates coming down, satisfaction levels continuing to rise […]”, said Mahaney.

There is a pertinent issue at hand while the company looks at expanding its subscriber base, and it is the availability of the content. In the US and UK there are thousands of screenplay writers whereas this might not be the case in, for example Germany or France. Furthermore, Netflix, Inc. (NASDAQ:NFLX) is expanding  into markets which may have less appeal to English language programs, or even the US culture as a whole might not tingle their taste buds for so speak, thus making it a risky investment as the company explores these unchartered waters.

Mahaney however looked at this issue in a different light. He remarked that the company has been in Mexico, Brazil, and Argentina for nearly three years and has significantly penetrated that market. Even though he realises that the stock is already trading at 4% above the analysts average target price, which was also the reason why Netflix, Inc. (NASDAQ:NFLX) made it to CNBC’s list of most hated stocks, he is interested in the company more for fundamental reasons, chiefly its market penetration ability.

Mahaney believes that financial markets will revise their valuations following even more growth from the stock which has already been a strong outperformer for the last one and a half years.

Disclosure: none