Netflix sees its biggest competitor as linear TV, and not necessarily a slate of new streaming competitors -- and recent results from Comcast seems to support that claim.
The cable giant posted its latest earnings before the bell today, topping expectations both on earnings and revenue. But Comcast (CMCSA) - Get Report also shed 149,000 subscribers from its cable division, above estimates, which extends a years-long trend of customers ditching pay TV in favor of alternatives.
This bodes well for Netflix, Stifel analyst Scott Devitt wrote in a note on Thursday.
“Comparing Netflix to introductory pricing and / or inferior OTT products as a justification for worrying about the competitive climate is missing the fact that the cable, telecom, and satellite video industry (where all the money is) is shrinking with no end in sight,” he wrote, adding that unlike Comcast and others, Netflix is unencumbered by legacy businesses.
Devitt projected that Netflix shares, which rose 7.2% to $349.60 on Thursday, will double over the next four to five years as it achieves various milestones in subscriber volume, revenue and net income. Stifel maintains a “buy” rating and $390 target price on Netflix shares.
Netflix's streaming competitors include Disney+ (DIS) - Get Report, Amazon (AMZN) - Get Report Prime Video, Apple (APPL) TV+, and soon, AT&T (T) - Get Report WarnerMedia's HBO Max and Comcast's own Peacock service.
Earlier this week, Netflix reported lower-than-expected subscriber growth in the U.S. and Canada, but outpaced expectations on international growth.
Netflix management acknowledged "slightly elevated" churn levels in the fourth quarter that impacted its domestic growth as well as first quarter guidance. They pinned the churn on a combination of pricing increases and the launch of rival services.