Netflix: Loyal Subscribers Love Netflix- And So Does Wall Street
By: Leslie Cohen
Great news for Netflix, Inc. (NFLX) as it will replace Monsanto in the S&P 100. Monsanto is being acquired by BAYER (BAY.TI). Netflix’s stock closed up 1.1% to $365.80 on Tuesday, June 5th 2018.
The way we view entertainment has changed. Kannan Venkateshwar, media analyst of Barclays Capital states, “We believe the economics for companies with global streaming scale like Netflix may be more favorable than theatrical releases, over time.”
Netflix has given control over to the consumer on how they watch movies. And- consumer are loving it. It gives the viewer a wide choice of content that is viewable any time- on demand, and on any device.
What’s not to love about Netflix?
“13 Reasons Why” one of Netflix’s most popular shows drawing an audience in the second season of an average audience of 2.6 million viewers in the U.S. , all within the first three days on air, according to Nielsen ratings. The premiere episode attracted 6 million viewers in three days of its premiere episode. The controversial series about teen suicide and rape closed with a whisper at the end of season two. Good news for fans, production for season three is tap to premier in 2019.
What’s driving Netflix growth are operating profit per paid subscriber. Netflix has been adept at increasing pricing without losing subscribers. Netflix does have high costs to develop content and must borrow tremendous amounts of capital to pay for content to run ahead of its competitors , Walt Disney Co (DIS), and Amazon.com, Inc. (AMZN)
In foreign countries like Africa and Asia that growth may slow because of less expensive competitors are already on the market in those countries. Netflix international streaming contribution margin is 15.3%, less than half the amount of its U.S. streaming segment.
CWEB Analysts have initiated a BUY Rating for Netflix, Inc. (NFLX) and price target of $450 within 12 months
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.