Netflix (NFLX) - Get Report shares were lifted to outperform from neutral at Baird, with the investment firm saying subscriber-growth trends suggest that the streaming-media company is benefiting strongly from the coronavirus outbreak.
"We view NFLX as one of the preeminent stay-at-home winners, with the current environment enabling it to widen its global lead," Baird analysts say.
"Our quarterly survey checks support strong subscriber growth, which could be a near-term catalyst and should provide additional revenue leverage."
The firm notes that Netflix ended 2019 with 167.1 million global video subscribers, up 20% from a year earlier. Netflix had 61.2 million subscribers just in the U.S.
Netflix reported a $3.3 billion free-cash-flow loss for 2019, but the company said that it expected that loss to be its peak. Baird expects free cash flow to turn positive in 2023 and grow quickly from there.
Baird's quarterly subscriber survey pointed to a solid increase in penetration in the U.S., with the U.K., Brazil and Germany also showing positive trends.
"Additionally, while free-cash-flow losses are of heightened investor focus and remain a risk, we expect FCF losses to continue to improve, which should allay some concerns," Baird said.
The company's $5 billion of cash on hand "should provide enough liquidity over the next one to two years, after which the company will need to raise additional capital, which remains a risk," Baird's note said.
Because of increased competition, the streaming service also may not be able to moderate its spending on content, as it had planned to do, Baird said.