What a tech media comeback story.
About 1 1/2 years ago, Netflix shares were getting hammed after the subscription-based media company announced a major price hike, and changes to its subscription plans. Fast forward and Netflix today is within shooting range of $200 a share. They've successfully weaned their business model away from antiquated DVDs to creating content and streaming programming across multiple platforms.
"Today it's a streaming business," said Barton Crockett, media and entertainment analyst at Lazard Capital Markets on CNBC Monday. Crockett has a buy rating on the stock and a $200 price target. Shares recently were trading around $184.
Content Is King
In the U.S., "these guys are getting tremendous traction with consumers," Crockett said. Surveys show about 40 percent of consumers have Netflix or want to get the service, Crockett said. "And that number keeps growing every time we look at it."
Netflix more recently has become a legitimate content creator in Hollywood. The company is spending ballpark $1.5 billion domestically on content, Crockett estimates. "That's nearly as much as HBO, that's a lot more than Discovery. It's a lot more than Starz. They're spending enough to have critical mass of content that people want to see," the analyst said.
Going forward as spending levels off and subscribers increase, Netflix's margins could reach the 40 percent to 50 percent margins seen at premium networks such as HBO and Starz. Netflix current margins are in the low single digits.