Netflix Earns International Crown with Original Shows

Published on: 18 Jul, 2017

Netflix Inc (NASDAQ: NFLX) hit another milestone – one that is key to its ability to sustain its scorching pace of growth, twenty years after Reed Hastings co-founded it, and a decade after the company introduced video streaming.

At the end of the June quarter, international subscriber count increased 8.6 percent to 52.03 million, eclipsing domestic customer numbers of 51.92 million, Netflix said on Monday.

On Tuesday, the company’s shares jumped as much as 9.7 percent to a record high of $177.44, on track to add roughly $7 billion to Netflix’s $70 billion market value.

Analysts said that betting on original shows puts Netflix in pole position to win over more millenials who are shunning traditional television.

According to an article from Reuters, Netflix has a new-found ally as well: pay-TV platforms.

Morgan Stanley analysts wrote that several companies such as Virgin Media in UK, Altice in France, and Comcast Corp (CMCSA.O) are bundling Netflix into their pay-TV offerings, which could rapidly ramp up viewer numbers in younger markets.

At least 17 brokerages raised their price targets on Netflix. Morgan Stanley and JP Morgan were the most bullish, each raising their target to $210.

The median price target is $192.50.

“Morgan Stanley analysts wrote in a research note “We believe the rapidly growing content offering led by originals, that in aggregate garnered 91 Emmy nominations last week, drove the stronger new sign-ups.”

This year, original TV shows including “The Crown” , “Stranger Things”, and the latest season of Kevin Spacey-starrer “House of Cards” brought in more customers than Netflix had predicted for the second quarter.

Hastings said on a conference call on Monday that Netflix has a long way to go to get more content to please more members, adding that positive returns made him comfortable that the company should continue to invest in original shows.

According to an article from Reuters, the company has often been criticized for spending too much on content. It said earlier it planned to spend about $6 billion this year for original shows and expected to have negative free cash flow of $2 billion to $2.5 billion.

Wedbush analyst Michael Pachter, a long-time critic of the company says that “We think that Netflix is destined to be a ash burning high growth company until it changes its strategy and accepts is fate as a highly profitable slow growth company.”

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