Could Netflix, Inc. Become a $500-Billion Company?
Online TV-streaming service provider Netflix, Inc. (NASDAQ:NFLX) has seen its best-ever performance on the market this year. NFLX stock is up almost 135% in its year-to-date run and is continuing to ride higher on the market. Shareholders of NFLX stock are nervous about whether this rally will continue or another rout will soon follow. Here are three reasons why I believe the good days for Netflix stockholders are far from over.
1. Market Leadership
For starters, Netflix is the biggest and the best in the industry, which easily grants it the leadership title. Netflix enjoys the top spot in online TV and movie streaming and its growing stronghold over the industry is a testament of its great service. Netflix has more than 40 million subscribers in the domestic market alone. Rival Hulu’s subscriber base of nine million pales in comparison, while Amazon.com, Inc.’s “Prime Video” service is restricted by “Apple TV” and Google’s “Chromecast,” thus hindering Prime Video’s subscriber growth.
Plus, Netflix is expected to continue gaining more ground in the industry. Ericsson has released this year’s mobility report and is predicting mobile data to be largely dominated by videos, which are expected to take over 70% of the total data usage in the next five years. Of this total, Netflix is expected to take the second-biggest share, with 20% of total video data where it’s available. This makes it second only to Alphabet Inc’s YouTube application. (Source: “Ericsson Mobility Report: November 2015,” Ericsson web site, November 17, 2015.) From where I stand, the future looks bright for Netflix and NFLX stock.
2. High Hedge Fund Stakes
George Soros is buying NFLX stock; enough said! (Source: “Soros Fund Management 13F Filing,” Securities and Exchange Commission web site, last accessed November 19, 2015.) A massive 82% of the outstanding NFLX stock is currently held by institutions, suggesting this stock is nothing less than a Wall Street darling.
George Soros ramped up his stake in NFLX stock in the latest quarter. At Wednesday’s intraday price of $120.00, Soros’ stake in NFLX shares now stands at more than $38.0 million.
Billionaires Julian Robertson and Andreas Halvorsen are right behind Soros, also adding NFLX stock to their hedge fund holdings in the latest quarter. Two more bigwigs currently invested in Netflix are Steve Cohen and Ken Griffin. Seemingly, Wall Street’s top hedge fund investors like Netflix stock and I wouldn’t want to pick the wrong side of the trade when the Street is buying it.
3. International Growth
Netflix still has a lot of scope to grow beyond the U.S. and Canada to continue boosting its top-line numbers. Netflix’s total worldwide subscriber base currently stands at more than 65 million. (Source: “Netflix Hits 65 Million Subscribers,” Statista, July 16, 2015.) Take out the domestic market and this number drops to 23 million.
The company has plenty of room to grow in the international markets. Netflix added Australia and New Zealand to its international markets earlier this year. Its performance in these two countries has been outstanding so far. The company also launched its service in Japan two months ago. Next up, Netflix has its eyes set on the Southeast-Asian market, particularly India.
In addition, Netflix’s CEO, Reed Hastings, indicated in the second quarter that China is also on the list of expansion targets, though when and how the move will happen still remains uncertain. China is expected to takeover North America in mobile data usage in the next five years, which means it will become the biggest market for video content and a major target for streaming services like Netflix. Should Netflix successfully find its way into China, there will be no stopping the company from gaining a global monopoly.
The Bottom Line on NFLX Stock
Netflix is expanding by leaps and bounds, boasting strong revenue growth in the process. It will take the company’s competition a long time before they can break its juggernaut over the worldwide subscription-based video streaming industry. The best evidence: smart money is investing in more and more NFLX stock shares.
My take on NFLX stock is straightforward: I don’t want to be on the wrong side of history.