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Sangara Narayanan
Sangara Narayanan
Articles (543) 

Netflix on Track for Solid International Subscriber Growth

The near miss in the 1st quarter should be compensated for in the 2nd quarter

April 20, 2017 | About:

Netflix (NASDAQ:NFLX) reported its first quarter 2017 earnings, which beat Wall Street earnings estimates, came in line with revenue estimates and missed its own subscriber addition forecasts. Missing subscriber addition forecasts can take a huge bite out of the stock price but, fortunately for Netflix, the miss wasn’t too wide, with overall subscriber addition during the quarter coming in at 98.75 million against its own forecast of 98.93 million.

The streaming video giant posted earnings per share of 40 cents with revenue of $2.64 billion during the first quarter while the market was expecting earnings per share of 37 cents and revenue of $2.64 billion. Revenue growth has been accelerating for Netflix; first-quarter revenue grew 34.7% compared to the prior period, a full 10% higher than the growth Netflix reported in first-quarter 2016.

The growth of international revenue has played a huge role in Netflix improving its revenue growth numbers. U.S. streaming revenues reached $1.470 billion during the first quarter, compared to the $1.161 billion the company reported last year, representing a growth of 26.61%. International streaming revenue reached $1.046 billion compared to $652 million during last year, a growth of 60.42%.

Netflix is now available in more than 190 countries, and the massive international rollout could have easily gone the other way for the company. Fortunately, the video on-demand streaming service market leader has been able to steadily increase its user base around the world, and that steady subscriber addition in international markets is helping to accelerate Netflix’s overall revenue numbers.

The faster its numbers grow in the overseas market, the more Netflix will keep increasing its investments toward original content and local programming. Though there are several competitors in the market, it will be difficult to catch up with Netflix in the international market when they still have plenty of more work to do to hold their positions in the U.S. This head start will allow Netflix to firmly establish itself as the top player in most of the markets around the world.

Netflix expects the growth story to continue its acceleration during the second quarter; the company has forecasted second-quarter 2017 revenues of $2.755 billion, a growth of 30.9%. Total subscriber base is expected to reach 101.95 million, a sequential addition of 3.2 million, which is significantly higher than the 1.62 million Netflix added in second-quarter 2016.

Disclosure:I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.

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About the author:

Sangara Narayanan
Sangara Narayanan holds an MBA from Kent State University, Ohio, and has worked on the floor as a trader in New York. You know where. He is passionate about capital markets and specializes in business analysis, stock valuations and making chicken curry

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