Netflix’s (NASDAQ: NFLX) lead in internet video streaming is unstoppable, according to one Wall Street firm.
Macquarie Research raised its rating for Netflix shares to outperform from neutral, citing the success of the company's original content strategy.
"Netflix is miles ahead in terms of programming hours, original content quality and time spent, and we don't expect this to change. Netflix has won," analyst Tim Nollen wrote in a note to clients Tuesday.
Netflix’s stock rose 55% in 2017 versus the S&P 500's 19% return.
The analyst predicts Netflix will increase its percentage of original content to 60% in 2020 from an estimated 25% in 2017, resulting in a $2-billion cost savings in licensing fees.
"Netflix is expanding its distribution relationships with cable operators and telcos globally, international growth is taking off on a concerted strategy to develop local content offerings, and Netflix is beginning to work on ways to reduce password sharing, which could drive even more subs," he wrote.
Nollen increased his price target for Netflix shares to $220 from $200, representing 15% upside to Friday's close.
"Netflix has changed the way people watch TV, and is now pushing further into film. Consumers' increasing lack of tolerance for advertising drives them to subscription OTT services," the analyst wrote.
"Disney's eventual OTT service is still two years away, and won't threaten Netflix, which besides holding onto a strong U.S. sub base is establishing passion brand status in many international markets."
The stock opened 2018 up $6.32, or 3.3%, from Friday’s close to $198.28
