Netflix will surge 32% to record highs as app download data points to strong subscriber growth, Goldman says (NFLX)

In a note published on Friday, Goldman raised its Netflix price target to $670, representing upside potential of 32% from Thursday's close.
The firm said COVID-19 continues to accelerate the trend towards video streaming services, and Netflix is a prime beneficiary of that trend.
Goldman believes Netflix could add at least 12.5 million total net paid subscribers in the second quarter, which would be well ahead of Netflix's guidance of 7.5 million.
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Strong app download trends suggest that Netflix could blow past net subscriber addition estimates when it reports second quarter earnings next week, according to Goldman Sachs.

In a note published on Friday, Goldman raised its Netflix price target to $670, representing upside potential of 32% from Thursday's close.

According to Goldman, Netflix is poised to report 12.5 million net subscriber additions for the second quarter, which would blow past its guidance for 7.5 million, and analyst consensus of 8.2 million.

The firm justified the sky-high estimate on data from SensorTower, which shows that the Netflix app has experienced a record in quarterly downloads and that year-over-year download growth reached its highest level since the first quarter of 2016.

Goldman dismissed the common bearish Netflix thesis: "if you haven't subscribed by now, you never will." The firm said Netflix is benefiting from an acceleration of the video streaming trend driven by the COVID-19 pandemic, as very few video streaming services can compete with the sheer scale of its ad-free content library.

The firm said it believes investors continue to underestimate Netflix's "global addressable market, the impact of incremental content spending, Netflix's growing value to both distributors and content creators, the weakening competitive landscape, and the acceleration of the global adoption curve in the current environment," Goldman said.

Goldman pointed to new content in the quarter that may have helped draw in new subscribers, including new seasons of "Money Heist," "13 Reasons Why," and "Dead to Me."

Additionally, the firm said Netflix could report positive free cash flow of $99 million for the quarter as content spending dries up due to the practical shut down of TV and movie filming amid the COVID-19 pandemic.

Shares of Netflix surged as much as 3% to record highs on Friday. Netflix is up 61% year-to-date.