Why HBO Could Send Netflix Shares Up: Analyst
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"We think that would be tremendously positive for Netflix and at the end of the day that certainly underlines our view here, which is we think there is a big paradigm shift," Pacific Crest's Andy Hargreaves said. "It's a big move from everything live to on-demand, ... and Netflix is essentially the best in the world, we think, at executing that model."
Pacific Crest raised its price target for Netflix to $225 and upgraded its rating to "outperform" on Tuesday. The firm improved its outlook because it sees Netflix's subscription base increasing from 43 million domestic subscribers to 46 million, Hargreaves said.
Subscription growth will be fueled by the low-cost of Netflix's service—which is about $8 per month— and the quality of its content, he said.
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"The breadth of content and increasingly the quality of the content that they have is unmatched by other premium services. HBO obviously has tremendous quality, and we think Netflix is heading in that direction in the quality and it has more breadth," Hargreaves said.
Last week, HBO's chief executive Richard Plepler hinted that there is a possibility that the company would be open to selling its HBO Go streaming service to consumers who are not subscribed to a cable TV service, but are subscribed to broadband Internet, according to a Reuters report.
Currently, only HBO GO is only available to people who subscribe to a cable TV service and purchase HBO channels for a monthly fee. A move to expand the HBO service shows that Netflix is on the right track for the future of media, Hargreaves said.
"HBO kind of moving towards them I think is recognition that that model is the future of online viewing," he said.