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NFLX’s International Membership Additions Exceeded Expectations

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Netflix’s international streaming business in 4Q15

On January 19, 2016, Netflix (NFLX) announced its 4Q15 results. Netflix recorded international streaming revenues of $566 million in 4Q15.

As the chart above indicates, Netflix’s contribution losses continued, reaching $109 million in 4Q15. Netflix had total international memberships of 30.0 million in 4Q15, with net additions of 4 million members. The company’s total international memberships and net additions exceeded its internal forecasts of 29.5 million and 3.5 million, respectively.

In 4Q15, Netflix’s average subscriber price rose 4%–5% year-over-year, excluding the impact of foreign currency exchange rate fluctuations.

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Netflix’s outlook in 1Q16

Netflix expects revenues of $653 million with a contribution loss of $114 million in 1Q16. The company has stated that its contribution loss could also be impacted by foreign currency exchange rate fluctuations and its spend on content in 1Q16.

It’s important to note that Netflix does not use derivatives to hedge itself against exchange rate fluctuations. The company pays the content licensing fees in local currency in different geographic areas. However, the reason it expects to be more susceptible to exchange rate fluctuations is because it’s increasingly looking at content streaming rights on a global basis.

The company expects total international memberships to reach 34.4 million and net additions to reach 4.4 million members. It still expects to be profitable in its international streaming segment from 2017 onward.

Netflix remains optimistic about its net additions and its international market performance in 1Q16, as it believes that the popularity of its original programming will move it forward in international markets.

Netflix makes up 0.97% of the PowerShares QQQ Trust Series 1 ETF (QQQ). If you’re interested in exposure to the television and radio sector, QQQ has 4.4% exposure to that space. QQQ also holds 8.7% of Microsoft (MSFT), 6.0% of Amazon (AMZN), and 4.7% of Facebook (FB).

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