Piper Jaffray told investors Netflix profits for 2020 could double the current expectations if the international growth path follows its domestic business.
The firm reiterated its overweight rating on the video streaming company's shares.
"While our Netflix EPS estimate is above consensus for 2020, it implies market penetration and contribution margin levels well below where domestic was at that stage in its lifecycle, suggesting we, and the Street, may be modeling 2020 profitability too low," analyst Michael Olson wrote in a note to clients Thursday entitled "If sequel is anything like the original, estimates way too low."
The analyst presented a scenario where Netflix could generate up to $11.15 in earnings per share for 2020 versus his $5.75 estimate and the Wall Street consensus of $4.98.
"If, in the 24 quarters after hitting 20M subs (which will occur at end of 2020), the int'l streaming business is anywhere close to the market share and margin levels achieved by domestic, then 2020 consensus EPS for Netflix would be ~100% too low," he wrote.
Olson estimates Netflix's international paid subscribers base will grow to 79.6 million accounts by 2020. At that level the company will reach 16 percent penetration of international households with broadband internet access, not including China. In comparison, Netflix's U.S. streaming business reached 51 percent of broadband households in the six years after first hitting the 20 million subscriber level.
"It's highly unlikely that Netflix will be at 51% int'l (penetration of broadband HHs) share by end of 2020, but we would also argue that a 35ppt difference in penetration between the two markets at that point in their respective life-cycles appears large," he wrote. "While int'l may not attain similar margin & penetration levels by 2020, we increasingly believe assumptions appear overly conservative."
As a result, Olson raised his price target for Netflix to $190 from $166, representing 20 percent upside from Wednesday's close.
In similar fashion Thursday, MKM Partners raised its Netflix price target to $195 from $175, saying Wall Street is too pessimistic in its domestic subscriber forecasts for the company.