How Is Netflix Likely To Grow In The Next 2 Years?

by Trefis Team
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Netflix (NASDAQ: NFLX) continues to see strong growth, and now has over 117 million streaming subscribers in over 190 countries with a vast range of TV shows and movies, including original series, documentaries and feature films. In 2017, the company’s revenues increased 32% year-over-year (y-o-y) to $11.6 billion, largely driven by growth in the number of international subscribers. The company’s solid international growth has come despite stiff competition from the likes of Amazon and Hulu, as well as local content providers in various markets. This will likely continue going forward, as the company continues to invest in original content.

Accordingly, we expect Netflix’s revenue to grow by nearly $7 billion (27% CAGR) through fiscal 2019. To arrive at our fiscal 2019 net revenue estimates for Netflix, we have broken down the revenues and estimated separately. We have also created an interactive dashboard analysis which provides a detailed analysis of how to arrive at this growth number. You can make changes to these variables to arrive at your own revenues estimates for the company.

We have a $304 price estimate for Netflix, which is slightly ahead of the current market price.

Netflix has a long-term goal of ensuring that as much as 50% of the content streamed on its platform is original. As a result, it is spending a significant portion of its content budget on original shows. The company plans to spend as much as $8 billion on shows and movies in 2018, up from $6 billion earmarked for content in 2017, which should drive subscriber growth but weigh on margins.

We expect the company to reach 58 million subscribers in the U.S. with an average monthly fee per subscriber of $10.77, translating into $7.5 billion in domestic streaming revenues in fiscal 2018. We expect a similar rate of growth in subscribers in 2019, and estimate Netflix’s domestic streaming revenues to reach $8.3 billion. In addition, we also expect close to 84 million subscribers in international markets with an average monthly fee per subscriber of $8.10, translating into $7.2 billion in international streaming revenues in the same period. However, we estimate a comparatively slower rate of growth in subscribers in 2019, as competition in the streaming market could intensify with the addition of Disney’s direct-to-consumer streaming offering. Netflix has been growing its subscribers at an annual rate of 10% in the U.S. and nearly 40% in international markets in the last two years, leveraging its original content slate and the growth in streaming. We expect this trend to continue in the near term as well.

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