GOLDMAN: Netflix's International Subscriber Base Is Set To Boom

According to a new research report from Heath Terry at Goldman Sachs, Netflix is set to boom internationally as the company adds six new markets this year, and up to 4 new markets annually thereafter.

At the end of the first quarter, Netflix had 11.7 million paid international subscribers. By the end of 2017, Goldman sees an opportunity for Netflix to have 62 million international subscribers.

Expanding into new international markets will bring Netflix's total potential subscriber base to 207 million, and Goldman thinks Netflix should be able to capture 30% of this audience as HBO currently has about 33% market share in its international markets.

Additionally, Goldman sees Netflix's U.S. user base growing to 55 million in 2017 from 46 million at the end of the first quarter.

Goldman sees potential for Netflix growing its user base on mobile and other devices, and expects subscriber growth to continue exceeding expectations.

From Goldman:

"While most estimates of Netflix's subscriber opportunity focus on broadband households, we believe this will increasingly understate the size of the market as more content is consumed through the growing ecosystem of connected devices and off wired networks. At $8.99, Netflix could increasingly come to be viewed as a high value add-on to a wireless data plan for any number of devices."

In its note, Goldman upgraded shares of Netflix to "Buy" from "Neutral" and put a $560 price target on the stock. In morning trade, shares of Netflix were up more than 5% to trade near $464.

On Twitter, Risk Reversal's Dan Nathan said that the upgrade, "feels like capitulation."

Nathan notes that Goldman has had a Neutral rating on the stock since December 2011. In July 2011, shares of Netflix nearly hit $300 before ending the year at around $70.

Since the beginning of 2012, however, Netflix has been a powerhouse, gaining more than 570% over that period.

Hard to ignore.