Netflix to Benefit from `Stay-at-Home Era' Caused by Coronavirus

Netflix will benefit from the shelter-in-place measures caused by the coronavirus pandemic, analysts say.
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Netflix  (NFLX) - Get Report will benefit from the shelter-in-place measures caused by the coronavirus pandemic, analysts said Wednesday.

Shares of the Los Gatos, Calif., streaming-media giant at last check were off 3.3% to $363.17.

"[As] an increasing number of people experience Netflix, at an especially high rate of usage, they will be loath to go back to life without it,"  said Bernstein analyst Todd Juenger, who raised his price target on the company to $487 a share from $423. 

"[One] of the lasting cultural impacts of the Covid-19 crisis will be to accelerate the adoption of streaming video, and further ingrain it into the culture."

Millions of people around the world will not only sample the service "but experience a lot of Netflix," Juenger said.

Juenger, who has an outperform rating on the stock, said in a note to clients that he expects "the stay-at-home era to have both near-term and long-term benefits for Netflix."

"We expect the near-term benefits include some combination of reduced churn, increased gross adds, and higher average revenue per user (tradeups to plans allowing more concurrent streams)," he said.

However, Juenger said "it's impossible to get conviction on how to model the financial impact, with no basis or precedent."

"We see production stoppages as the biggest negative disruption for Netflix – but even that is a (big) relative advantage for them," he said. 

"Netflix has a significant pipeline of new content still in place to be released over the next several months, and a massive collection of recent originals from the past three-plus years, many of which were lost in the sheer volume and remain undiscovered by consumers."

Wells Fargo analyst Steve Cahall raised his price target for Netflix to $305 from $265, but kept his underweight rating, warning that "this is a great company, but the valuation is extended."

Cahall estimated that roughly one-third of "Netflix originals that were slated for 2020E could be delayed."

"This would decrease the platform’s content value by roughly 20% in H2 2020," he said.

Bank of America analyst Anthony Cassamassino included Netflix in his top 10 list of U.S. ideas for the second quarter.

"We see prospects for top- and bottom-line outperformance in the first half as stay-home orders globally may be pulling forward Netflix adoption and engagement," said Cassamassino, who has a buy rating on the stock. 

"We anticipate a first-half subscription boost based on third-party data and anecdotal reports providing evidence of a surge in user engagement. 

"NFLX should also outperform in a recession, given its low price point and sticky subscriber model."