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Netflix Subscriber Growth Estimate Raised by JPMorgan

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Jan. 8 2020, Published 8:07 a.m. ET

Yesterday, JPMorgan Chase raised its subscriber estimates for Netflix (NASDAQ:NFLX) on the back of its robust international growth, reported CNBC. The investment bank estimates Netflix’s global subscriber count will reach 300 million by 2024. As reported by Barron’s, analyst Doug Anmuth forecast that the company would add 7.7 million international subscribers in Q4, whereas it had guided for 7.6 million. As of the September quarter, the streaming giant had 90 million overseas subscribers. Nearly 57% of the company’s total subscribers are from outside the US and Canada.

JPMorgan Chase maintained its “overweight” rating on the stock with a price target of $425, which implies a 28% upside to NFLX’s current stock price.

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The Witcher and The Irishman will drive the stock higher

Anmuth is optimistic about Netflix because of its slew of top-notch, original content in December quarter, noted Barron’s. The analyst listed the original series, The Witcher, and the movie, The Irishman, as factors behind his optimism. According to Barron’s, Anmuth said, “Our takeaway is that [fourth-quarter] content performed well, with new series The Witcher and returning series The Crown outperforming our expectations, films The Irishman and 6 Underground and returning series You delivering strong viewership as expected.”

According to Parrot Analytics, The Witcher is the most popular show in the world, notes Business Insider. The series, which debuted on December 20, has even surpassed the popularity of the Disney+ show, The Mandalorian. In November, Forbes reported Netflix has already renewed The Witcher for a second season. Business Insider reports Parrot Analytics stated that The Witcher‘s “success is also crucial for Netflix heading into the 2020s as the streamer fights off new SVOD players and declining global digital original demand share.”

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Data indicates slowing growth in Brazil for Netflix

It’s no secret that Netflix’s ultimate growth corridor is its international markets. According to the company’s latest filing, the EMEA (Europe the Middle East, and Africa), APAC (Asia-Pacific), and LATAM (Latin America) regions have grown immensely over the years. In fiscal 2018, EMEA revenue soared 68% YoY (year-over-year), while APAC revenue climbed 64% YoY. Meanwhile, LATAM revenue rose 36% YoY. Considering the streaming giant’s robust international growth, Pivotal Research raised its price estimate for Netflix stock in the last week of December. Pivotal estimates the stock could rally nearly 30% in 2020 thanks to the company’s overseas growth.

According to Netflix’s regional data, the LATAM region contributed 14% of Netflix’s revenue in the September quarter. With 29.3 million subscribers at the end of fiscal 2019’s third quarter, LATAM is the streaming giant’s third-biggest market. A critical market for Netflix in the region is Brazil. In September, The Rio Times, citing Tecnoblog, indicated that the country had over 10 million Netflix subscribers. Therefore, we can see that Brazil commands nearly a third of Netflix’s LATAM market.

However, a recent finding by SimilarWeb indicates that in the fourth quarter, Netflix’s growth in Brazil softened. According to Business Insider, SimilarWeb reported a 10% sequential drop and a 5% YoY drop in daily active users in Brazil in the fourth quarter.

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Netflix faces disappointment at the Golden Globes

Another frustration that Netflix faced just a few days into 2020 was the 77th Annual Golden Globe Awards. Despite having 34 nominations, the streaming giant won only two awards. On the other hand, competitors Disney, Viacom CBS, and AT&T ruled the awards. Netflix’s highly acclaimed The Irishman didn’t see a single win at the awards. Netflix movies Marriage Story and The Two Popes were also nominated. Even though Netflix didn’t win many awards, the nominations show the platform’s diverse content. And Netflix still has the Academy Awards to look forward to.

All eyes on fourth-quarter subscriber numbers

Netflix stock surged nearly 30% in the last three months in 2019. After being subdued for the first six months, the streaming giant’s stock gained momentum after the company’s third-quarter results. US subscriber losses in the second quarter and looming fears of a streaming war weighed on NFLX stock. However, the company’s international growth and robust content slate restored investors’ confidence.

Netflix’s slowing growth in Brazil and disappointing outcome at the Golden Globes aren’t likely to be significant roadblocks for the stock. Investors are more interested in the company’s subscriber growth, international revenue, and cash deficit management. In the next few weeks, Netflix is set to release its fourth-quarter earnings. We’re eager to see if the company has been able to maintain its international subscriber growth momentum.

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