Netflix's stock closed the week just under $100 after topping that landmark for the first time ever on Thursday. The stock has had a phenomenal run: it gained 16 percent Thursday alone, and for the year is up about 80 percent.
The stock's latest jump is thanks to first quarter results, in which Netflix grew earnings, revenue, and grew to 14 million subscribers. The company also raised its full-year guidance.
Citi's Mark Mahaney tells me that Netflix is at an inflection point—the fact that its streaming service is widely available on devices like the iPhone and iPad, online, and through TiVo, allows it to become ubiquitous.
Netflix faces faces growing competition from new players, including Google's YouTube, which is starting to charge to stream movies and Hulu which is reportedly getting into the business.
But Mahaney says the fact that Netflix is the only hybrid solution of both physical discs and streaming gives it a huge advantage. Yes, all home entertainment distribution, will eventually be digital. But in the meantime most people watch movies on DVD, and the fact that Blockbuster (BBI) and other brick-and-mortar players are shuttering shops plays into Netflix's strength.
Netflix revealed that a full 55 percent of subscribers used its streaming service in the first quarter, that's up from 48 percent in the prior quarter and just 36 percent in the same quarter in 2009. This shift to a digital model will benefit Netflix with lower costs for postage and physical distribution.
But the ability to watch online means subscribers will watch more, which promises higher content costs. Netflix may have to pay content creators a lot more, but JP Morgan's Imran Khan says net-net, more digital distribution will still be a win for Netflix. For one thing, it's easier to convert new subscribers to the model.
Khan and Mahaney both have "buy" ratings and $110 price targets on the stock, which is striking considering how fast the company has risen. According to Thomson Reuters first call, as of today 16 analysts have a hold on the stock, 4 have a buy, 6 a strong buy, 4 a reduce, and 3 a sell.
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