Shares of online DVD rental company Netflix Inc. surged after an analyst recommended that investors buy the company’s stock, saying its unique business model could help it top 7 million subscribers by 2007. The company’s shares gained 7.1 percent, to trade at $26.89 — the stock has more than doubled since the year began.

Netflix currently has more than 3.5 million subscribers, more than Blockbuster Online or any other US-based online movie rental company. The company’s dominant position is bolstered by the increased access to online services for movies and music by American households. Consumers enjoy the convenience of having movies delivered to their mailbox, and NetFlix’s massive selection of hollywood and Indy films, plus television series.

Wal-Mart and Blockbuster entered the online video rental service in 2004, but Wal-Mart bailed out in 2005, passing its customers to NetFlix. Blockbuster meanwhile, has seen its valuation plummet and has management issues to work out.

 

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