Will Netflix Stock Continue To Gain?
Netflix, Inc. (NASDAQ:NFLX) stock made impressive gains as it jumped about four percent on Wednesday and closed the session at $106.28.
Netflix is focused on expanding its markets and global presence, which has been pushing NFLX stock higher.
Netflix announced yesterday that it had signed an agreement with luxury movie theater chain “iPic Entertainment,” to screen original movies in theaters on the same day they debut on Netflix. This is the first-of-its-kind long-term deal with a theater chain. Netflix will show its movies in iPic cinemas in New York and Los Angeles, with the option of showing them at iPic’s 13 other locations, or even at independent theaters. This takes the company closer to fulfilling its theatrical ambitions. (Source: “Netflix, iPic Entertainment Agree to Screen Original Movies in Theaters, Online Simultaneously,” The Wall Street Journal, October 4, 2016.)
Netflix has been increasing its investments in its original content, and the iPic deal covers 10 movies from its original-programming division. As the company deals with slowing subscriber growth, such deals are likely to bring in additional revenue and provide the much needed boost to NFLX stock.
Shares of Netflix have declined seven percent year-to-date as investors remain concerned about the company’s slowing subscriber growth. NFLX stock had registered big losses in April this year, on reports that the company expected subscriber growth to slow on account of rising prices and competition from Amazon.com, Inc. (NASDAQ:AMZN), which launched its video service to compete with Netflix.
Another cause of concern has been the rising costs of producing original content. Analysts had raised concerns about the high costs of content last month, given the company’s push into market expansion and increasing competition with Amazon’s “Prime Video” service. Analysts at Macquarie had downgraded Netflix stock to “underperform” from “neutral.” They said that Netflix’s plans to expand in 130 countries will turn out to be expensive. (Source: “Netflix is facing high content costs and increasing competition from Amazon,” MarketWatch, September 13, 2016.)
As investors look forward to third-quarter results this month, the key metric will be growth in subscribers. If the company does really well on that front, Netflix stock is likely to go through the roof.