Below are key drivers of Netflix's value that present opportunities for upside or downside to the current Trefis price estimate for Netflix:
Netflix's U.S. Streaming Subscribers: Currently we forecast Netflix's U.S. streaming subscriber base to increase from around 54.8 million in 2017 to more than 80 million by end of our forecast period. There could be more than 10% downside to our price estimate if this figure remains below 65 million instead. This could happen if the market growth for streaming slows down, and competition weighs heavy in the future. On the other hand, there could be around 10% upside to our price estimate if Netflix blows past expectations, and captures around 98 million U.S. subscribers.
Domestic Streaming Contribution Margin: Currently we forecast this figure to rise from about 38.5% in 2017, to close to 40.3% by the end of our forecast period. However, there could be a downside of about 10% to our price estimate if the margin was to decline to 35%. On the other hand, there could be upside of about 10% if this figure was to increase to 45% instead.
For additional details, select a driver above or select a division from the interactive Trefis split for Netflix at the top of the page.
Netflix offers video rental service in the form of DVDs, as well as online streaming to U.S. customers. The company also offers streaming services in international markets and is currently available in about 200 countries.
Netflix's content is available for streaming through a variety of devices such as PCs, Macs, video game consoles, tablets, and smartphones. The company is consistently working towards striking more content deals in order to improve its online library.
In the case of DVDs, Netflix's customers can choose the videos they want to rent from an online library available on the company's website. Unlike traditional video rental businesses, such as Blockbuster and Redbox, Netflix does not have any store locations and instead delivers DVDs through the postal mail.
The majority of Netflix's value is currently hinged on its U.S. Streaming services for the following reasons:
Firstly, the DVD subscribers are expected to decline significantly in the U.S., while streaming subscribers are expected to grow. The home video market is growing in the U.S. and streaming is the best way to tap it given the proliferation of multiple internet-enabled devices. Netflix has seen rapid adoption of its streaming plans in the U.S. Although the competition is intensifying, Netflix remains a leader in the streaming segment.
Secondly, the international streaming business is currently a relatively lower value contributor, but this is expected to change in the future as the US streaming market becomes saturated. Netflix has expanded into around 200 countries. The progress has been so strong that the company now believes it can complete its global expansion phase by the end of 2016 while managing to still be profitable.
There is very clear shift of video consumption to the Internet, and Netflix is one of the companies leading this change. The company's DVD subscribers are declining and future growth will come from streaming subscribers. Eventually, the company would like to replace all of its physical DVDs with online library.
Netflix has been rapidly rolling out its service into new markets and has seen a strong uptake in those markets. We expect that to continue going forward. The company now has a presence in around 200 countries.
Netflix has been facing increasing competition in online streaming. Along with Amazon and Hulu, there are more and more streaming options from companies such as CBS, HBO, and soon to be Disney and ESPN.
Netflix’s original content has improved the perception of the overall brand. The company’s original programming has garnered critical acclaim by scoring many award nominations in recent years. Netflix has effectively marketed these exclusive shows to maintain its subscriber momentum.
Netflix's (NASDAQ:NFLX) stock hit an all-time high on Monday as the company posted its fourth quarter results, which were better than expected due to strong growth in subscribers across both the U.S. and international streaming markets. The company posted 32.6% year on year growth in revenues to $3.4 billion, in line with our expectation. ...More
Netflix (NASDAQ:NFLX) is set to announce its fourth quarter results on Monday, January 22. Despite the intensifying competition in the over-the-top (OTT) streaming market, we expect Netflix to report growth in revenues and subscribers across both the domestic and international markets. ...More
Netflix's (NASDAQ:NFLX) results in the first three quarters of 2017 have been encouraging. The company continued its strong run in the streaming business with significant growth in international subscribers, while domestic subscriber growth has been solid despite the intense competition in the domestic streaming business. ...More
Netflix's (NASDAQ:NFLX) DVD subscription business has been on a down-slide for a while due to a broader change in digital video industry dynamics, the increasing popularity of online streaming and Netflix's decision to separate its DVD and streaming plans. ...More
Netflix’s (NASDAQ:NFLX) international streaming business has been a major growth driver in recent years, as the company has launched its operations in several new geographies. According to Trefis estimates, the international streaming subscription business accounts for around 44% of Netflix's value. Revenues have grown at a CAGR of 108% in the last five years. ...More
Netflix’s (NASDAQ:NFLX) domestic streaming business is the cash cow for the company, and one of the primary sources for funding its geographic and content expansion. While the domestic business has reported stellar growth in recent years, its growth is slowing down somewhat as the market matures. According to Trefis estimates, the U.S. ...More
Netflix (NASDAQ:NFLX) has seen its stock gain nearly 60% this year, significantly outpacing the S&P 500, which is up by less than 21% year to date. ...More
Netflix’s (NASDAQ: NFLX) subscription prices are set to increase in December. While the standard U.S. subscriptions will jump from $9.99 to $10.99, the premium tier pricing will increase even more, from $11.99 to $13.99. ...More
Netflix’s (NASDAQ:NFLX) streaming revenues have increased from $3.46 billion in 2013 to $8.29 billion in 2016, a compound annual growth rate (CAGR) of 34%. For the first three quarters of 2017, streaming revenues swelled to over $8 billion and are expected to reach over $11 billion for the year. ...More
Netflix's (NASDAQ:NFLX) stock hit an all-time high on Monday as the company posted its third-quarter results, which were better than expected due to strong growth in subscribers. The company posted 30% year on year growth in revenues to $2.99 billion. ...More
Netflix (NASDAQ:NFLX) is set to announce its third-quarter results on Monday, October 16. While competition among over-the-top (OTT) streaming services is intensifying, we expect Netflix to report growth in revenues and subscribers across both the domestic and international markets. ...More
Disney recently announced that it will be pulling its content from Netflix (NASDAQ:NFLX) once its deal with Netflix expires at the end of 2018. Disney plans to launch its own streaming services for its original content, and as such will be removing its content from competing plat... ...More
Netflix’s (NASDAQ:NFLX) stock has soared in the past month as the company posted better than expected growth in the international market, and witnessed over 53% growth in international streaming revenues in Q2 2017. Furthermore, the international business' margins are improving, which should help boost the company's overall profitability in 2017. ...More
Netflix's (NASDAQ:NFLX) stock hit an all-time high on Monday as the company posted its second quarter results, which were better than expected due to strong growth in subscribers. The company posted 32% year on year growth in revenues to $2.78 billion. ...More
Netflix (NASDAQ:NFLX) is set to release its second quarter results on July 17. While the competition in the online video streaming industry is intensifying, Netflix is expected to report growth in revenues and subscribers across both its domestic and international markets. ...More
Netflix (NASDAQ:NFLX) recently launched its first interactive show “Puss In Book,” where its viewers can choose what happens next in the story. This show - which is part of Netflix’s kids content - will engage viewers as they make decisions on how the story mov... ...More
Netflix's (NASDAQ:NFLX) international streaming business accounts for about 42% of the company's value, according to Trefis estimates. While the business is currently generating losses, we expect the company's total international subscribers to exceed its U.S. subscriber base by the end of this year. ...More
Recently Netflix (NASDAQ:NFLX) announced that few of its shows - such as Sense 8 and The Get Down - will not return for another season. While the streaming giant is not known for cancelling shows, its CEO believes that it is time for the company to be more calculating about shows, which will lead to a high... ...More
The on-demand streaming space is increasingly getting crowded. While Netflix (NASDAQ:NFLX) is the market leader with a 50 million+ strong user base, Amazon Prime Video is making in-roads among viewers with its huge content budget. Social media players such as Facebook and Twitter are also looking to stream live sports and other major events. ...More
As growth in the domestic market stagnates,Netflix's (NASDAQ:NFLX) international segment is crucial for the company's long term growth. According to our estimates, by the end of our forecast period, the international streaming segment will contribute more to the company’s overall revenues (~ 52%) than the U.S. business. ...More