- Bank of America Merrill Lynch sees a $300 per share bull case for Netflix.
- Netflix shares skyrocketafter solid earnings on Monday.
- Bank of America Merrill Lynch says Netflix will need to post faster pricing growth and increase international subscribers to hit $300 a share.
Bank of America Merrill Lynch just laid out a bullish case for Netflix, saying it could rise to $300 a share.
In a note to investors on Tuesday, BofAML reiterated a buy rating on Netflix and raised its price objective to $199 from $184.
Shares were trading 9.3 percent higher to $176 in Tuesday's premarket. A move to $300 would represent a 70.5 percent gain from the premarket price.
The Bank of America Merrill Lynch's note was the most bullish on Netflix on Tuesday. On Monday, the streaming video company announced that 5.2 million subscribers had been added in the second quarter, 2 million more than analysts forecasted.
To hit the $300 per share mark, Netflix would need to post faster pricing growth of 7 percent per year versus its current models for 5 percent, while also rapidly increasing subscribers to 250 million internationally, the bank said.
"Pricing is a big driver as sub gains take more time to achieve offsetting valuation gains, but price changes are immediate rev. and margin lift," Bank of America Merrill Lynch analyst Nat Schindler said in the note.
"We note that NFLX stated it expects "mid-single digit ARPU growth for the foreseeable future" and recently increased prices in Australia. We think further price increases in international markets could represent upside to our model and support our bull case scenario."
The note follows Netflix's Q2 earnings, which hit after the bell on Monday.
Revenue came in at $2.79 billion versus $2.76 billion expected by a Thomson Reuters consensus estimate. Netflix predicts revenue of $2.97 billion in the third quarter vs. $2.87 billion expected by Wall Street. Earnings per share in the second quarter were 15 cents, a penny short of expectations.