Netflix Stock to Grow with Rise in International Subscriptions

NFLX stockPopular Content to Drive NFLX Stock Higher

Netflix, Inc. (NASDAQ:NFLX) stock touched a record high of $145.83 Monday before falling over two percent in the last trading session on account of general weakness in the market. All the FANG stocks—Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc-owned Google (NASDAQ:GOOG,GOOGL)—were major losers Tuesday as the overall market plunged.

However, with the exception of Google, all others have posted impressive gains in the year to date. Netflix stock has gone up by 15% in the year to date, beating the broader S&P 500 Index, which posted gains of around five percent in the same time period.

Last year, the internet television network had announced its expansion into 190 countries and billions in investment in original programming. In the fourth-quarter results, Netflix reported growth in international membership by 5.12 million, as against a forecast of 3.75 million and 4.04 million in the year-ago quarter. That makes 47% of the total members to be outside the U.S. The ASP for the international segment rose 13% year-over-year. (Source: “Quarterly Earnings,” Netflix, Inc., January 18, 2017.)

Netflix sales have been rising and its original content remains popular. Investors have become more bullish on the expectations of a rise in international subscribers as the company beat growth estimates in the last quarter.

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In the year 2016, Netflix generated $8.3 billion in global streaming revenue, an increase of 35% year-over-year. It finished the year with 93.8 million members, adding about 19 million members. Netflix is upbeat about the coming years as internet TV becomes the preferred choice instead of linear TV. (Source: Ibid.)   

Although Amazon.com and Google are also focusing on their existing video streaming products, Netflix, Inc. is ahead in the game, and the competition may find it hard to displace Netflix from its leading position. Soaring subscriptions and content popularity will keep NFLX stock in the limelight.

Its focus on making inroads into international markets is what makes Netflix stock so valuable. The huge growth potential is obvious to NFLX investors and its original shows are expected to garner a big fan following around the globe, as well. Just last week, film industry veteran Scott Stuber joined Netflix to help push the company’s original film initiative. He will lead the development, production, and acquisition of the company’s expanding slate of original films for its global audience of more than 93 million members. (Source: “Scott Stuber Joins Netflix in Expanded Role to Lead Growing Original Film Initiative,” Netflix, Inc., March 15, 2017.)

Ted Sarandos, Netflix Chief Content Officer, said that Scott was well known in the film industry and his innovative work will boost the Netflix original film initiative as the company enters a new phase of big global productions with some of the greatest directors, actors, and writers in the film business.

NFLX stock has touched new highs since the beginning of the year on improved sentiments.

The stock chart below shows how Netflix stock has outperformed the index in the year to date, posting 15% gains as compared to around five percent posted by the S&P 500.

NFLX stock

Chart courtesy of StockCharts.com

Netflix also created buzz last week when it ditched its five-star ratings in favor of a thumbs-up/thumbs-down system. Todd Yellin, VP of product, said that the change will happen in April and it will be rolled out globally. In addition to this change in ratings, the company will also start percent matching. This means that it will use algorithms to show a percentage below a title based on the probability of a viewer liking it. (Source: “Netflix is ditching five-star ratings in favor of a thumbs-up,” The Verge, March 16, 2017.)

This is like the recommendations list that is shown by “YouTube,” which has been the major reason for the popularity and growth of the Google video platform. Netflix’s use of machine learning for creating more personalized content viewing experience bodes well for Netflix stock.

Although there might be minor setbacks along the way, Netflix stock is poised to go higher in the long run. NFLX stock investors with a long-term view will not be disappointed by the stock performance, as the company strengthens its foothold in the global arena.