Netflix Stock Price Touches New High, But Analyst Says It’s Still Way Too Low

This is why stock trading isn’t for the faint of heart.  Netflix shares are up more than 81% so far in 2015, and touched an all time high today — $628.50. Its market value is higher than Dish Network, CBS, Viacom, and Twitter. So you might think it’s fully priced.

But hold on: Pivotal Research Group’s Jeffrey Wlodarczak is turning heads today with a report in which he raised his target price by $200 to a whopping $850.

That’s driven in part by his optimism about CEO Reed Hastings’ ability to drive the company into new markets including China. The analyst also says that Netflix “remains a takeout candidate for a large Internet player” such as Amazon, Google, Apple, or Alibaba.

In any case, Wlodarczak believes there’s a lot of room for growth: Netflix could have 160 million customers worldwide by 2021, which is 15.9% more than he previously envisioned. International territories account for 95 million of the expected subs, up 21.8% from his earlier forecast.

The analyst adjusted his numbers after adding China and South Korea to his forecast. Netflix’ talks with a potential Chinese partner should pay off, he figures, giving the company 13.5 million subs there — equal to 5% of broadband households — by 2021. He believes South Korea will add 2.5 million customers, or 12.5% of the potential market.

Content costs will have to rise. But the company can make up for that with “limited price increases.” All told, the company could generate more than $40 in earnings per share by 2021, he predicts. You get to his $850 stock price if you figure the present per share value of the expected cash flows, and then multiply by 20 (he previously used a multiple of 17).