Netflix Rides On Subscriber Addition And Content Strength

By Zacks Investment ResearchStock MarketsNov 21, 2017 10:20PM ET

www.investing.com/analysis/netflix-rides-on-subscriber-addition-and-content-strength-200267562

Netflix Rides On Subscriber Addition And Content Strength

By Zacks Investment Research | Nov 21, 2017 10:20PM ET

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On Nov 22, we issued an updated research report on Netflix Inc. (NASDAQ:NFLX) .

The company is one of the leading video streaming platforms driven by its expanding content portfolio and subscriber base. Netflix is on a growth trajectory, gathering momentum not only on its home turf but also in international markets.

Notably, the company has beaten the Zacks Consensus Estimate in two of the trailing four quarters, delivering an average positive surprise of 1.25%. In the past 30 days, the Zacks Consensus Estimate for the fourth quarter has increased 2.43% to 42 cents.

Shares of Netflix have gained 66.8% year to date, significantly outperforming the industry’s 12.5% rally.

Original Content Drives Growth

Netflix has been drawing strength from its growing portfolio of original content. The company has also been ramping up its efforts to boost regional programming. This is expected to expand its international presence as the domestic market approaches saturation.

We note that at the end of the last reported quarter, Netflix's paid streaming members across the globe increased 24.9% year over year to approximately 104 million. This was driven by 10.5% and 43.2% year-over-year increase in paid members in the Domestic and International Streaming Segment, respectively.

Netflix has over 109 million total subscribers globally. We believe continuing subscriber addition and expanding content portfolio are the key catalysts that will help Netflix to sustain growth going forward.

Netflix, Inc. Revenue (TTM)

Netflix, Inc. Revenue (TTM) | Netflix, Inc. Quote

The company’s portfolio of original films also improved with the addition of Death Note, Naked and To the Bone to its platform in the third quarter. Netflix plans to release 80 original movies in 2018.

However, investors need to watch out for high costs that accompany rapid international expansion and production of original content. The whopping budget of $6 billion for this year and $7-8 billion for the next may weigh on the bottom line.

Also, stringent competition from established players like Amazon (NASDAQ:AMZN) Prime, Hulu and Time Warner’s HBO is a major headwind. Moreover, Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) are also gearing up to boost their original content portfolio, which poses a threat to the company.

Zacks Rank

Netflix has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

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Netflix Rides On Subscriber Addition And Content Strength

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