NEW YORK (AP) — Rivals' shuttered rental stores and its new application for streaming-enabled mobile devices puts Netflix Inc. in "the sweet spot of its growth phase," an analyst said Tuesday, raising his price target and profit estimates for the online movie rental company.
The success of Netflix's application to stream video on Apple Inc.'s new iPad tablet computers will continue to drive subscriber growth, FBR Capital Markets analyst Heath Terry wrote in a note to investors. The application will eventually be available for the iPhone and iPod Touch.
Meanwhile, Movie Gallery, the nation's second-largest movie rental chain, is in the process of closing its 1,050 remaining stores after filing for Chapter 11 bankruptcy protection.
"As fewer neighborhoods are able to support retail stores, renters will be increasingly pushed to other options: kiosks, (video-on-demand) and Netflix," Terry said, lifting his price target on Netflix's stock to $130 from $100 and maintaining an "outperform" rating on the stock. Terry also raised his estimate for 2011 earnings to $2.7 billion from $2.6 billion.
The company will offset the price of adding and improving content by streaming video, which costs about 5 cents per film compared with 90 cents to $1 for DVD fulfillment, Terry said.
Netflix shares have nearly doubled in value since the beginning of the year and nearly tripled over the past 52 weeks. Stellar earnings reports and subscriber growth have propelled the stock.
Its shares added $3.38, or 3.3 percent, to close Tuesday at $105.