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Netflix Could Rally 30% in 2020 on Overseas Growth


Dec. 23 2019, Published 7:47 a.m. ET

Netflix’s (NFLX) in-depth regional data, released last Monday, has prompted Wall Street to view it in a new light. Before these official numbers were released, we could understand Netflix’s overseas growth only through its subscriber numbers during its earnings releases.

The detailed subscriber and revenue data showed that the company has grown phenomenally in international markets since 2017. In the past few days, leading analysts have expressed bullish views on Netflix stock on the back of its international expansion.

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Netflix to exceed Q4 international subscriber addition guidance: Pivotal Research

On Thursday, Pivotal Research boosted its price target for Netflix stock to $425 from $400, noted CNBC. The new price target implies a 28% upside from its current level. Pivotal said that the company’s “international growth story remains compelling.” Jeffrey Wlodarczak of Pivotal also predicted that Netflix would add 8 million international subscribers in the fourth quarter. This estimate exceeds the company’s guidance of 7 million new subscribers. As for US paid members, Wlodarczak forecasts an addition of 600,000, in line with Netflix’s guidance.

Additionally, in the long term, Wlodarczak forecasts a total of 375 million Netflix subscribers by 2027. According to CNBC, Wlodarczak said, “The more in-depth international disclosure gave us greater confidence in our overall forecasts, highlighted by an increase in our terminal year total subscriber forecast of 25 million to 375 million [by 2027] and forecasting [average revenue per user] trends.”

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RBC predicts international markets to be more lucrative

Furthermore, according to CNBC, RBC has forecast that Netflix stock could rise by 30% in 2020 on the back of “international surge potential.” RBC’s price estimate for Netflix stock is $420, and it has reiterated its “buy” rating. RBC analyst Mark Mahaney cited his optimism on the company’s expansion in international markets. He said, “We believe International could actually be as or more profitable than the U.S.”

Nomura analyst sees strength in Latin America

Even as the competition between streaming giants intensifies, Netflix is showing strength in the Asia-Pacific (or APAC) and EMEA (Europe, the Middle East, and Africa) regions. Though its subscriber count in the EMEA and APAC regions is lower than in the US and LATAM (Latin America) markets, it is growing quickly. Asia’s large population and potential for mobile data penetration make it a hotspot for Netflix. Benzinga reports Nomura Instinet analyst Mark Kelley also sees LATAM as an active growth corridor. He said, “Netflix has made significant progress in penetrating one of its most mature international markets (Latin America was the first major international expansion in 2011) and a region where English is not the primary language.”

As of December 20, Netflix stock had returned 25.89% quarter-to-date, closing at $336.40. The stock had soared around 11% since the company released its international data. Revealing these significant numbers has been a huge win for Netflix this year.

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Wall Street optimistic about Netflix in the long run

Even before the release of Netflix’s regional data and amid competition, Piper Jaffray was optimistic about the company. StreetInsider reported Piper Jaffray analyst Michael Olson rated the stock as “overweight” and set its price target at $400. He said, “The combination of our preliminary ‘Netflix Navigator’ search index and YouTube trailer analysis point to Q4 subscriber addition upside for both domestic and international. Despite an onslaught of new streaming services, we expect Netflix will continue to capture a significant portion of traditional content dollars as they migrate to streaming.”

The launch of Apple TV+ (AAPL) on November 1, followed by Disney+ (DIS) on November 12, worried investors. The stock slipped 3% the day after the Disney+ launch. However, it then gained momentum and climbed more than 7% that month.

Investors and analysts both have confidence in Netflix emerging as a stronger competitor in the long run. The company does have a lot of risks and challenges ahead. However, its international growth story shows its ability to strategize well and explore potential growth avenues. A significant area of concern remaining for Netflix, however, is its negative cash situation. The company is borrowing heavily to invest in content, an area it sees as key in outpacing rivals.

In the next few weeks, Netflix is set to release its financial data for the fourth quarter. We’ll be watching whether the company’s content investments bear fruit.


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