Morgan Stanley says Netflix has much more room for growth

Netflix’s potential US market could extend well beyond the 40-50 million households that some investors believe will mark the limits of its reach, according to Morgan Stanley.

Raising its share price target from US$270 (€206) to US$314 and reiterating its overweight on Netflix stock, the investment bank said that continued innovation in internet-connected devices such as gaming consoles and smart TVs is likely to lead to growth in Netflix’s subscriber base.

Morgan Stanley believes that there are already between 45-60 million devices capable of receiving Netflix’s service in US homes. It estimates that there are currently 79 million residential broadband households in the US, which is expected to grow to 89 million by 2017, increasing the addressable market for the streaming company.

Analyst Scott Devine said: “We expect Netflix’s domestic streaming TAM to converge with broadband households over the next few years as the number of homes without a method of connecting Netflix to their TVs dwindles. We raise our domestic sub forecasts slightly as we think more broadband households will subscribe over the next three to four years.”