After surging more than 130% in 2015, just how high can Netflix, Inc. (NASDAQ:NFLX) stock go? Well, with the company’s surprise announcement of becoming almost fully global, we might see a new era of growth for Netflix and the NFLX stock price.
Global expansion has been the main driver behind Netflix’s subscriber growth recently. In the second quarter of 2015, the company added a total of 3.3 million subscribers, with 2.4 million coming from outside of the U.S. In the third quarter, Netflix’s global subscriber count increased by 3.6 million, among which 2.7 million came from overseas. (Source: “Q3 15 Letter to Shareholders,” Netflix, Inc., October 14, 2015.)
Netflix Stock: Birth of a Global TV Network
Netflix has announced expansion plans in the past, saying that it would open up more markets around the world. We previously learned that Netflix was scheduled to launch in South Korea, Taiwan, and Singapore in early 2016. However, things turned out to be much better than expected, with the company launching in 130 new countries at once. (Source: “Netflix is Now Available Around the World,” Netflix, Inc., January 6, 2016.)
Reed Hastings, co-founder and CEO of Netflix, delivered the news in a keynote speech at this year’s Consumer Electronics Show (CES 2016) in Las Vegas. In his speech, Hastings called the introduction of Netflix in 130 new countries “the birth of a global TV network.” (Source: “Suddenly, Netflix is a ‘global TV network’,” CBS News, January 6, 2016.)
With the new markets added, Netflix is now available in 190 countries around the world. The company also added Arabic, Korean, and Simplified and Traditional Chinese to the 17 languages it already supports.
Note that China still isn’t included in the company’s current marketplaces, but Netflix plans to continue to explore options in the 1.4 billion-potential-subscriber market. The company doesn’t have plans to enter North Korea, Syria, or Crimea at the moment, due to restrictions on American companies operating in those countries.
Entering new markets, such as South Korea, India, Russia, and Singapore is no doubt a big achievement for Netflix. But will the company be successful in those markets? Quite likely. Here’s why…
According to a study by research company Global Web Index earlier last year, Netflix could already have millions of viewers in countries where Netflix isn’t available. The study was based on a survey of VPN users, who could bypass the geographical restrictions and access content that was not otherwise available in their regions. (Source: “29% of VPN Users Accessing Netflix,” Global Web Index, January 12, 2015.)
Results of the survey suggested that 29% of VPN users had accessed Netflix in the previous months. The highest percentages came from Canada and Mexico, where Netflix was already available, so VPN users were most likely accessing the American version of Netflix to watch shows that were available only in the U.S.
The real insightful numbers came from the East, where 32% of VPN users in India and 31% of survey respondents in China said they used Netflix in the previous month. With Netflix launching officially in countries such as India, its subscriber base could get a serious boost.
The Bottom Line on NFLX Stock
Of course, opening in new markets is just a start to the company’s worldwide expansion. Like Reed Hastings notes, “It’s a big deal, but the real work is the next 20 years.”
To increase its international appeal, Netflix would likely invest heavily in global licensing and global originals and that won’t be cheap. However, investors seem to care more about user growth and if we use a 30% long-term international penetration rate, Netflix could potentially reach 200 million global subscribers.
As long as new members keep signing up, the NFLX stock price will continue its upward trend.