The Ratings Game: Analysts applaud Netflix for another ‘home-run quarter’

Now is not the time to doubt Netflix’s growth story.

That’s the view of analysts who on Tuesday applauded blowout first-quarter results from the streaming entertainment service, which included 7.4 million more streaming subscribers above the more than 6.6 million expected, and a best-in-its-history 43% year-over-year jump in streaming revenue.

Shares of Netflix NFLX, -1.24%  were up nearly 7% in premarket trade on Tuesday.

Read: Netflix is growing at a stunning rate — and so is its profit

“We believe Netflix has built the ideal model for global distribution of premium video in the internet era, and it is working to improve the efficiency of that model at a rapid pace that others cannot currently match,” said a team of equity analysts led by Andy Hargreaves at KeyBanc Capital Markets, as they lifted their price target to $385 a share from $300 and kept their rating at overweight.

Hargreaves said Netflix continues to demonstrate a knack for driving subscribers via marketing and content investments. He added that the company may end up breaking past KeyBanc’s own forward-subscriber estimates — 28.2 million and 26.8 million for global net subscriptions this year and next. Over the next 10 years, KeyBanc expects Netflix will hit 80 million U.S. subscribers and 250 million globally.

Analysts at Morgan Stanley upped their price target to $370 a share from $350, maintaining an overweight rating. A team of analysts led by Benjamin Swinburne zeroed in on what they called a a “rare combination” — Netflix beating subscriber-growth forecasts and increasing 2018 margin expectations at the same time.

Morgan Stanley analysts said if Netflix can keep outperforming its own subscriber growth numbers it could begin to expand margins even more rapidly and reduce cash burn, which is the rate at which a company is losing money.

“Importantly Netflix beat the net subs [subscribers] on both domestic and international subs as its shows the company’s aggressive international expansion strategy is bearing fruit and putting major fuel in the company’s growth engine for the rest of 2018 and beyond,” said Daniel Ives, head of technology research at GBH Insights, calling it another “home-run quarter” for the company.

Domestic streaming net adds of 1.96 million against Wall Street forecasts of 1.48 million was a big “positive takeaway for the bulls,” as the numbers grew despite a price increase levied in the December quarter, added Ives.

The latest results get the message across “loud and clear” that the company has plenty of growth drivers in its arsenal to drive more subscriber growth in the U.S. and internationally, he said. Ives, though, has left his highly attractive rating and $375 price target on Netflix unchanged.

Netflix has bucked pullbacks that have eaten into gains for other big-name technology stocks this year. Its year-to-date surge of just over 60% is the best return the S&P 500 SPX, +0.81%  currently has to offer on that basis right now.

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