Netflix Shares: Netflix (NASDAQ:NFLX) shares have significant growth potential in the days to come, and its free cash flows will turn positive by 2022, according to Goldman Sachs Heath Terry.

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Netflix shares have hit the highest level of $384 this week after the robust bull-run since the start of this year. NFLX shares jumped more than 80% since the beginning of this year, buoyed by a substantial increase in subscriber rate along with its aggressive growth plans.  The stock has the 52-week trading range of $149 to $384 a share – with the market cap of $156 billion.

Goldman Sachs Set Street High Target for Netflix

Goldman Sachs is bullish on Netflix prospects. The firm has issued a street-high price target of $490 for Netflix stock with a strong ‘Buy’ rating. Goldman Sachs analyst Heath Terry believes NFLX revenue growth (which grew 32.4% last year and 43% in the first quarter this year) is beginning to outpace content spending growth.

The analyst said: “The growing content offering and expanding distribution ecosystem will continue to drive subscriber growth above consensus expectations…NFLX’s cash burn totaled $2.02B in 2017 and should worsen to $3.06B in 2018 before improving to $2.12B in 2019 and $1.45B in 2020 and finally turning positive as the company’s multiyear investment in content generates $500M in positive cash flow.”

NFLX Financials and Strategies are Supporting Goldman Sachs’ Claim

The company’s revenue growth of 43% in the first quarter was driven mainly by a 25% increase in average paid streaming memberships and a 14% rise in ASP.

Its domestic streaming additions stood at around 1.96M compared to the consensus estimate for 1.48M and NFLX guidance for 1.45M. International streaming also enlarged to 5.46M, higher substantially from its earlier guidance for 4.90M.

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The company, on the other hand, has been investing aggressively in its content business by raising debt from financial markets. Netflix management plans to spend $7 billion of content expense on the variety of growth initiatives. The management believes revenue and free cash flows from this business will increase steadily in the coming years to offset higher expenses.

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