Netflix faces several headwinds at home
Netflix (NFLX) stock has risen 10.8% since January 23 after falling 8.8% since announcing its fourth-quarter earnings results in mid-January. The stock has jumped 52.6% since troughing on December 24, 2018.
Despite its robust subscriber growth, the video streaming giant has been seeing slowing revenue growth. The factor slowing down the company’s revenue growth is its mature domestic market, which is seeing slow, single-digit subscriber growth.
Netflix’s US paid subscriber base grew 6.2% YoY (year-over-year) to 58.5 billion in the fourth quarter. This growth rate was a drag on the company’s revenue growth, as it makes more from American subscribers than it does from fast-growing international subscribers.
The company made $34 per paid subscriber in the United States in the most recent quarter compared to $26 per paid subscriber abroad. Netflix’s international paid subscriber growth has remained at ~40% YoY over the last couple of years.
Netflix is facing increasing competition in the United States
While the company’s revenue growth was still robust at 27.4% YoY in the fourth quarter, it slowed from the ~40% YoY growth it saw in the second quarter of 2018.
Netflix recently hiked its prices across all of its plans in the United States, presumably to counter slowing subscriber growth. In the next few quarters, we’ll find out whether its loyal subscriber base minded that or not. However, the effects may not be too dire.
Netflix faces another headwind in the United States in the form of rising competition. The Walt Disney Company (DIS) is launching its Disney+ streaming service this year, which means that it will be stripping its content from Netflix.
Other media giants, such as Comcast’s (CMCSA) NBCUniversal, have also announced that they’re entering the already-crowded video streaming space next year.
Netflix has been spending billions to launch original programming to counter the content that’s leaving its platform. More media giants in the business also means that Netflix may either have no access to their content, as in the case of Disney, or need to pay a higher price to acquire it.
However, the streaming giant’s extensive library means that users in the United States may still prefer Netflix or have multiple subscriptions.
While the company’s domestic market is saturating, its international market is booming and could continue to surge given its investments into local content and its relatively low competition abroad.
What all this means to its relatively expensive stock is that it could continue to rise—albeit mildly.