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Netflix: Still A Buy

May 26, 2014 | About:
tyokunbo

tyokunbo

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Netflix (NFLX) gained 2.25 million domestic subscribers in the first quarter of fiscal 2014. This brings its total to 35.7 million. The company provides Internet television network service that enables subscribers to stream TV shows and movies directly on devices in the United States and internationally. Netflix operates in the domestic streaming, international streaming, and domestic DVD segments. The company also offers standard definition DVDs and Blue-ray discs to its subscribers in the United States. It is headquartered in Los Gatos, California and was founded in 1997.

Numbers at a Glance
Netflix has been working to improve its quality of service from a technical point of view. In its first quarter financial results, the company reported earnings of 86 cents per share on revenues of $1.27 billion. Netflix’s earnings were above analyst expectations of 83 cents a share, while the company’s revenue was in line with the $1.27 billion Wall Street analysts forecast for the quarter. In the first quarter of 2013, Netflix earned 5 cents a share on $1 billion in revenue.

Positive Outlook
Netflix's management says it ultimately expects non-U.S. subscribers to surpass those in its home market at some point. It also expects to achieve profitability in its international business going forward. To achieve the objective, Netflix is going to get into a broad set of markets.

Future Initiatives
In the next three months, Netflix plans to raise prices $1 or $2 for new members globally. Existing member monthly fees would remain at current pricing. The initiative is to keep the company's revenue numbers up and pay for the company's original programming.

Also, Netflix added 4K video streams for some titles. To improve the quality of its production, it struck a deal with Comcast that enables a direct connection between the two at the transit area. These initiatives will help Netflix to boost its earnings in the coming quarters.

Head to Head
Netflix competes with Amazon (AMZN), Time Warner (TWX), and the privately owned Redbox Automated Retail. Compared to its peers, Netflix has a first-mover advantage of improving its programs through its original content. Netflix is rapidly expanding its original productions by having several running around the world.

Wings Across the World
Netflix engages in the streaming services primarily in Canada, Latin America, the United Kingdom, Ireland, Finland, Denmark, Sweden, and Norway. It has seen a tremendous progress in its international operations.

A look at Europe
Netflix has announced plans to launch its streaming-video service in France and Germany. Countries such as Austria, Switzerland, Belgium, and Luxembourg will also enjoy the company’s streaming service. Netflix is seeking to capitalize on the rapid growth in markets outside the U.S.

Latin America
On the Latin American front, Netflix has had successes in Argentina and Mexico. The company is stepping up its international expansion and pushing ahead market-by-market.

On a Concluding Note
Netflix’s strategy is evolving toward a more emotive experience. It is well-positioned to meet the changes in the sector through its innovative approach to its business. Its international operations are on the pace to achieve profitability. The company has continued to invest in value-added sectors. This should bring more gains to its shareholders in the future. Overall, Netflix is in a good position and has prospects for its growth in the international segment. Netflix will continue to provide returns to investors in the near future.


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