Netflix stock surge? The media disruptor still has “significant upside”, this investor says

Shares of Netflix Inc (Netflix Stock Quote, Chart NASDAQ:NFLX) spent most of the summer backing off from an all-time high set in late June, leaving some to wonder what’s in store for the streaming content provider.

Count Bruce Murray of the Murray Wealth Group among the bullish on Netflix’s stock —the portfolio manager says that there’s still an incredible amount of runway ahead for the company.

Netflix is basking in the glow of its Emmy Awards coup last night where it matched longtime industry champion HBO with 23 awards each. The rise has been a quick one for the company, which just began a concerted effort to create original programming only five years ago. In total, Netflix garnered 112 Emmy nominations this year, besting HBO’s 108.

Concerns over content were not top of mind for investors earlier this summer, however, when the company released its second quarter earnings on July 16. While the company beat expectations on EPS at $0.85 per share versus the consensus $0.79 per share and revenue rose from $2.79 billion to $3.91 billion for the quarter, practically on target with the consensus $3.94 billion, markets nonetheless reacted negatively to the company’s slowing growth in streaming user additions, which totalled 5.15 million new users for Q2/2018, significantly off the company’s forecast of 6.2 million from three months prior. (All figures in US dollars.)

As a result, the stock lost over 20 per cent of its value over ensuing weeks. NFLX has made up some of that ground since mid-August. But growth concerns shouldn’t be worrying shareholders, says Murray, CEO and chief investment officer for the Murray Wealth Group, in conversation with BNN Bloomberg.

Netflix stock has more runway, Murray says

“Netflix has about 130 million subscribers globally right now. There are 1.2 billion cable connections worldwide, so there’s a long way to go in market penetration,” Murray says. “I think Netflix is still in the growth phase. It’s like Amazon ten years ago.”

“There’s still tenfold growth in front of them,” he says. “Beyond that, they’d have pricing leverage. Right now, they’re pretty liberal — Netflix subscriptions can be used by several people. They could start to tighten that up.”

“We own a small position in the stock, mainly because of the valuation and because of this unknown, but we believe it probably has significant upside over several years,” Murray says.