Netflix stands to benefit from stay-at-home era: Bernstein

Bernstein analysts led by Todd Juenger raised Netflix's price target to a street-high of $487, as it sees long-term benefits from the stay-at-home era amid the coronavirus outbreak. These include production stoppages which could be good since people will want to watch new content, and the fact that Netflix remains in the position to be a buyer of licensed content.

Video Transcript

MYLES UDLAND: Let's go now to our call of the day. And we are talking about Bernstein's latest on Netflix, putting a new street-high price target on the name, $487 per share. They've got an outperform rating.

The title of the note here-- a movie that I loved, "Silver Linings Playbook"-- and Netflix, or Bernstein, rather, talking about how Netflix is kind of solidifying itself as part of this new era. And Dan, we've talked so often about this thesis for Netflix. And I think Netflix and Disney+ together is the foundation of this new bundle.

And I think it's hard for us here in the media who discuss this stuff all the time to maybe appreciate how big a shift it is for folks who had still been on the traditional cable bundle, and Bernstein here basically saying, everyone's at home, everyone's bored, everyone's watching Netflix, and they're not going back when this is over.

DAN ROBERTS: Yeah, I agree, Myles. And it's very hard not to be bullish. You know, I've said since the beginning of this thing that the streaming video services seem to me like the one area you can point to where this coronavirus time is, you know, without an asterisk, zero negatives, 100% beneficial and positive. I just don't see the downside for them. There's so many industries that are getting devastated and hit, and then there are industries where, well, on one hand, this is bad, but on one hand, there's a silver lining here. For Netflix, this is all good.

Now, I've also said long before coronavirus, you know, for a while-- and we love to talk about Netflix on our live shows-- that Netflix has the benefit of the kitchen sink. So yes, Disney Plus has the Disney vault, which I think is very valuable, the IP of all those Disney franchises. Hulu now has all the FX programming, and it is owned by Disney. Every streaming service has maybe one or two key shows that they've kind of gotten all their subscribers on the shoulders of that show, but then there's Netflix.

And some people, for a while, thought that Netflix had kind of lost its sheen. Remember when suddenly all these new services were launching, and it seemed like people a little bit went cold on Netflix. And Netflix had a couple quarters where US subscriber growth really dipped. But Netflix all along has the benefit of just a vast library of stuff. I mean, yes, people are talking about "Tiger King," which is new. People are talking about "Ozark," which is now up to number two. That's new programming.

But it's also a time when I suspect a lot of people are discovering stuff on Netflix that has always been there and is not brand new but is new to them. I mean, if you let that whole page just cycle through its recommendations for you-- and that autoplay is so dangerous-- suddenly, it's playing the first episode of a documentary that you've never heard of, and you say, mmm, that is something I'd like. They do know. You know? So I think that's a real advantage right now.

MYLES UDLAND: Well, but to that point, and Melody Bernstein points this out, Netflix is gonna need people pretty soon here to start appreciating their library, because a story we talked about a couple weeks ago is Netflix halting all of its production on all of its shows. And they set up that fund for some of its-- some of folks who were working on those programs. But Netflix's advantage here against some of its competitors was the amount of content it was creating, and that flywheel is going to be dry here for, one imagines, at least another three months if not longer

MELODY HAHM: Yeah, it's interesting, 'cause executives at Netflix did say that they seem to be stopped and set for the first half of 2020. And then they'll start to experience a little bit of that pain come the second half of this year.

I also want to point out some breaking news that Jared did flag to us. YouTube is actually planning Shorts, which is the equivalent of TikTok, on its platform. And my, you know, kind of out of the box thinking here is I wonder when Netflix-- if and when Netflix will kind of introduce a new model, if at all, because especially with younger folks who want to be participatory, who want to be able to engage-- especially as they get further into the reality TV realm, I wonder if there will be that added component that, to your discussion, regular TV just does not offer.

Because as of now, Netflix is TV, right? The interaction between the audience and the actual content creator is very much between a screen. However, I'm curious to see if there's a second iteration, as Netflix does have a lot of control and an ability to experiment, an ability to kind of tap into creators at home, whether that could end up supplementing some of this inventory that they already have.

MYLES UDLAND: Yeah, and you-- I mean, everybody right now is kind of thinking about, should we be doing something new in the interim to hold us over? Of course, the other side of that is an assumption that things go back to the way it was. When you're in as strong a position as Netflix, maybe you don't have to make that decision--