Pivotal comes out as Netflix’s most bullish voice, assigns biggest PT in Wall Street for stock

The research firm continued to note the company’s robust business momentum and held on to the view that NFLX is the dominant paid global streaming player for the foreseeable future, with the ability to generate a strong combination of subscriber, ARPU, and FCF growth.

Pivotal said NFLX is already demonstrating healthy scale, on top of rising operating margins. The scale is “particularly evident when compared to most of their streaming peers,” who are still generating mediocre financial and subscriber results, it said.

They also pointed out that streaming competitors have resorted to selling their exclusive library content to NFLX as they have no choice but to continue to sell their premium library content “to offset their own poor returns” and to tap into NFLX’s more than 500M global viewers in order to increase their content value.

“The key for NFLX going forward is to press their advantages and keep the subscriber/ARPU flywheel going because the larger they get, the more leverage they have over their peers/content creators, the better their product gets (allowing them to drive subscriber/ARPU growth), and the bigger the moat grows around their core business model,” Pivotal Research analysts said in their August 30 commentary.

Pivotal also thinks NFLX should use its massive balance sheet and equity to fund acquisitions such as a content library, sports leagues, and/or other major assets that can bolster the platform, like video game assets, all of which could potentially offset content cost inflation.

NFLX has a PT of $900 from $800, implying an upside of 30%, and a reaffirmed “BUY” rating from the research firm.

Stock is up marginally in early open market trading on the Nasdaq. Shares of the company have gained more than 42% since the beginning of this year, trailing ahead of the S&P 500’s performance, which rose over 17% so far.