Netflix (NFLX, Financial) slummed after reporting weak quarterly numbers, however, the stock has recovered completely and is currently trading above $96. The post-earnings dip was the ideal buying time, however, for investors who have missed out on the gains, there is still time to buy the stock as I think Netflix will head higher in the coming months.
What About Growth?
As compared to slow growth players, Netflix is an expensive stock. However, a leading player in the middle of a massive materialistic trend should not be anticipated to trade conventionally. Providentially, the company’s stock has been smashed recently, decreasing 22% in the last twelve months, making it more appealing than it was.
However, the company shared that it is growing rapidly. Though the trend is shifting towards streaming TV, the company’s overall streaming members have surged considerably to 83.2 million from 65.6 million throughout the previous twelve months.
Apart from this, the company expects to add 2.3 million streaming subscribers this year. Moreover, the company’s longer-term prospects look promising. The company’s management anticipates that its domestic member base will sooner or later peak between 60-90 million subscribers, indicating a surge of 47 million. Not only domestically, the company’s international subscribers are also rising at a good pace.
Going forward, international growth will be key for Netflix and investors should keep a close watch on the company’s international prospects.
Competition is Intensifying
Netflix is known for its world’s leading video steaming service. The company’s business model is pretty simple. Most significantly, the ease and widespread availability of the company’s business model has supported Netflix’s growth.
On the other hand, the company’s opponents are intensifying their game. At present, a major issue for the company is how inundated the United States market is. However, the company is working hard to safeguard itself from national, as well as overseas, competition.
It will become necessary for Netflix to seek innovation as various other services have begun proposing content that the company does not have.
Netflix's competitors are ratcheting up their game. A material concern for Netflix is how saturated the US market is and how both domestic and international competition may erode their base. As other services begin offering content Netflix doesn't have, Netflix will have to find a way to counter effectively and quickly.
At present stage, Amazon’s (AMZN, Financial) Prime service and Time Warner (TWC, Financial) capitalizing in Hulu are the major competitors of Netflix. Hence, it is important for Netflix to keep spending on its content to outperform the competitors.
Conclusion
Despite the fact that Netflix has recovered from its earnings debacle, I think the stock has more upside to offer going forward. International growth should push Netflix’s stock higher, which is why I am bullish on the stock.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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