Netflix Faces Rising Competition. “..missed its forecast for U.S. subscriber growth for the third straight quarter, but blew through its expectations for overseas expansion” By Todd Horwitz, Bubba Trading

 

 

Netflix Inc. missed its forecast for U.S. subscriber growth for the third straight quarter, but blew through its expectations for overseas expansion, a mixed performance that comes as the streaming giant faces heightened competition from a gaggle of rivals.

The Los Gatos, Calif., company said Tuesday that it added 423,000 domestic subscribers in the fourth quarter, compared with its forecast of 600,000 additions. It also posted an increase of 8.3 million subscribers in overseas markets, more than the seven million the company was expecting. It now has 167 million subscribers world-wide, including 60.4 million in the U.S. Shares in Netflix were up 2.3% in after-hours trading on Tuesday.
Netflix still has levers to pull if it wants to juice the money it makes from the domestic market. Guggenheim Securities analyst Mark Morris asked company executives in their quarterly interview if they would consider either an annual price increase, similar to the cable companies’ model, or offering an annual price that would potentially reduce churn, as some new arrivals do.
Netflix executives said they would not begin offering a “fixed model” for price increases but did acknowledge that in some countries around the world, an annual pricing model is standard. “It’s an interesting model,” said Greg Peters, chief product officer. “But we don’t know yet.”

In the new normal for Netflix, foreign markets will have to be potentially the only growth engine for subscribers, because Netflix still has open road with fewer competitors in many countries outside the U.S. That growth too may ultimately face challenges, when the new streaming services step up their international expansion beyond the U.S., but Netflix has some time there.

At home, though, it is time for investors to stop expecting huge growth and to start asking how Netflix is going to leverage and maintain the huge audience it already has on these shores.

Todd “Bubba” Horwitz

Financial Markets and Political Commentary

 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.