“We think a strong 2H content slate can help guide NFLX through choppy reopening trends, while management continues to lean into the share buyback and support the stock. The company plans to reduce its debt load and will buy back up to $5 billion in shares.Īccording to Bank of Montreal research, Netflix has solidified its position as a streaming video leader and its stock price should rebound strongly in the months ahead. After years of borrowing to fund production, Netflix has said it no longer needs to raise outside financing to support day-to-day operations. If the battle in the post-pandemic world is to keep subscribers from cancelling subscriptions, then it’s clear that Netflix remains well-positioned to win this race.Īccording to Parrot Analytics, despite the drop in demand for subscriptions in Q2, Netflix’s churn rate has remained low globally compared with its competitors, pointing to the importance of a balanced library of originals and licensed content.Īnother positive development that long-term investors should take into account is that Netflix is no longer dependent on debt to fuel its growth. Netflix co-CEO Reed Hastings estimates that international markets could someday account for 75-80% of his company’s user base-similar to Facebook (NASDAQ: FB) and Google (NASDAQ: GOOGL). “Lupin” from France, “Elite” from Spain and “Who Killed Sara?” from Mexico-all have been huge hits. Netflix’s non-English titles have also been popular this year, and not just in their home countries, attracting a broad viewership. Since its Asia launch in 2015, Netflix has released more than 220 original titles there.
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After creating widely watched Asia programming such as the Korean zombie period thriller “Kingdom” and reality series “Indian Matchmaking” last year, Netflix is spending more in Asia to secure exclusive content. In addition, the company produces more local content than any of its competitors. Netflix’s global subscription push is being fuelled by the company’s expertise in the content domestic audiences prefer, along with knowing what marketing they respond to.
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Not only will it continue to grow in places like Asia Pacific and Latin America, but it will keep growing in the U.S., Canada and Western Europe. The company believes it will sign up more than half of those people. Netflix has signed up 209 million of what it says are the 800 million to 900 million households that have either broadband internet or pay-TV access. The Asia Pacific region, NFLX’s smallest location, has contributed the most new customers this year. While it has signed up about half of potential customers in the U.S., it’s still a small player in many markets in Asia, Africa and Eastern Europe. The strongest argument for Netflix’s bullish thesis is the company’s expanding global reach. Here are three major catalysts that support our bullish case for Netflix despite the recent weakness: 1. But over the long run, Netflix's superior position in the video-streaming market is intact and any further weakness, in our view, should be considered a buying opportunity. In the short-run, Netflix may continue to underperform as subscriber growth slows after massive gains during the pandemic. Is this underperformance by one of the most innovative media companies of our time a worrying sign for long-term investors or those wanting to bet on the stock now? Netflix stock has barely budged this year when the benchmark NASDAQ Composite Index has gained more than 16%. This weak growth outlook is keeping many investors on the sidelines and leaving them unsure about the company’s prospects in the post-pandemic environment. The company also told investors last month that it’s expecting to add 3.5 million subscribers in the third quarter, well short of the 5.86 million analysts had projected. That was a period when people were stuck at home during the pandemic and flocked to its movies and shows. The Los Gatos, California-based communications services heavyweight has blamed its recent results on accelerated growth from a year ago, when nearly 26 million new customers signed up for Netflix in the first half.
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When combined with new customers in the first quarter, Netflix saw an escalation of about 5.5 million customers-the worst subscriber performance since the first half of 2013, when the service was operating in fewer than half the countries it currently does busines in now. The company added just 1.54 million customers in the second quarter that ended on June 30.
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The streaming entertainment giant is on pace for its slowest year of growth since 2013, a sudden reversal that's making its investors nervous.
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After numerous quarters of blistering growth, Netflix (NASDAQ: NFLX) is taking a break.