Analyst on Netflix: Don't worry about U.S. subscriber growth

Investors who are worried that Netflix (NASDAQ: NFLX) won't post significant increases in U.S. subscribers for the first quarter should relax, a Pacific Crest Securities analyst said, as the SVOD provider's international strategy will keep it on a meaningful growth track.

Andy Hargreaves, a Pacific Crest analyst, has lowered the forecast for new subscribers in the U.S. to just 300,000, about half of the consensus estimate by Wall Street analysts. Other analysts have raised questions about Netflix's continued profitability, causing the stock to slide as much as 25 percent in early February (it has since recovered). However, focusing just on subscriber numbers in one region is "myopic," Hargreaves said in a note reported by The Wall Street Journal.

Netflix's rapid expansion globally in 2015 -- bringing its total international presence to 190 countries, give the provider "the potential for meaningful upside to consensus estimates for international subscribers, which could vastly outsize any potential downside in the United States," said Hargreaves.

In short, while Netflix's stock may not see the huge jump in price it enjoyed prior to its seven-to-one split last July, it's likely worth hanging on to.

In the meantime, nScreenMedia analyst Colin Dixon noted that Netflix has significantly reduced its online catalog over the past year, dropping from almost 6,500 movies and 1,609 TV series in 2014 to 4,335 movies and 1,197 TV series. While the rising cost of content rights and stiff competition from the likes of Amazon and Hulu may have had an impact, Dixon said the lower amount of content is also a result of being smarter about what content to license.

Netflix uses its subscribers' usage data "to go after the individual shows and movies it believes will be a better match for its customers. This approach started in 2013, when Netflix did not renew its deal with Viacom," Dixon said in a blog post. "… Clearly, Netflix has decided paying more for fewer better quality shows [is] the winning strategy."

For more:
- see this WSJ article (sub. req.)
- see this nScreenMedia post

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