Netflix’s Shares Plummet In Regular Trading Over Worries With International Expansion

Posted: Jan 21 2016, 6:43am CST | by , in Latest Business News


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Photo credit: CNBC

On Wednesday, Netflix’s shares plummeted by 7% in what analysts have adduced to worries over the video streaming company’s international expansions and growing subscriber base, CNBC writes.

The twist, according to analysts, is that while Netflix is gaining large subscribers internationally, its US subscriber base may be affected, coupled with the negative free cash flows the company is facing in its core market.

Mike Olson, managing director and senior research analyst at Piper Jaffray thinks Netflix is nearing saturation with its US market, something that will ultimately spell doom regardless of the fact that the company is expanding and winning new subscribers abroad.

Netflix added 5.59 million net subscribers this quarter, compared to the 4.33 million subscribers it won last year – yet its quarterly earnings suffered a 7% slide within the week. It is true that the company shares gained 10% in after-hours trading on Tuesday evening, but it lost this during regular trading hours and investors considered the company’s next moves and how these impacts on its earnings.

"The positives are, we're super far from saturation — we're at mid-single digit penetration at this point so there's a lot of room to grow on that side," Olson said.

"The negative is, we're at a point where we just don't know what a lot of these new countries are going to look like for Netflix. They don't have a brand there yet, they don't have content at this point, so there's a lot of spend that has to happen. And they're shifting a lot of the marketing resources into those countries, which could also be negatively impacting the U.S. market," he added.

Netflix CEO Reed Hastings anchors the company’s success to its customers love for original content, yet the streaming service must vie with a host of local media firms to grow and expand those original content overseas. The competition will sure get fiercer, but that won’t stop the company from winning more subscribers by 2020, analysts say.

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<a href="/latest_stories/all/all/52" rel="author">Charles I. Omedo</a>
Charles is covering the latest discoveries in science and health as well as new developments in technology. He is the Chief Editor or Intel-News.




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