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Will Netflix's International Business Boom?



Netflix

Ophir Gottlieb, 2016-08-24

Preface
In a press release from Business Wire, IHS Markit forecasts Netflix international subscriber growth will boom to 75 million by 2020 and overtake the United States by 2018.

STORY
At the start of 2016, Netflix announced a massive international expansion adding 130 countries to its footprint. Here is a chart of that expansion from Statista:



The hypothesis that Netflix will see growth coming from the international markets is reasonable given the expansion and rather large investment in original content. What is different about this IHS Markit report, is how bullish it is for Netflix's future.

Remember, last quarterly earnings Netflix missed estimates for growth and even took guidance down. The company was supposed to hit 2.5 million new subscribers worldwide and actually came in at 1.7 million. The domestic numbers were anemic, with 170,000 new subscribers as opposed to the forecast for 500,000. International grew at 1.52 million new subscribers, but still well below the 2 million projections.

IHS Markit Ltd is not dissuaded. Here the take from Irina Kornilova, senior analyst at IHS Technology"

"
At the moment, Netflix has 79.9 million total paying subscribers. By 2018, international subscribers will overtake the number of subscribers in the US for the first time, and by 2020, Netflix will have 75 million international subscribers.
"
Source: Business Wire

IHS Markit Ltd went further to write:

"By 2018, Netflix will break the 100 million-subscriber mark. The number of Netflix International paying subscribers will grow 38 percent in 2016, with more than 2.8 million of these new paying subscribers coming from the new markets that Netflix launched in at the beginning of this year."

Here is a chart of Netflix subscribers through time.


Source: Statista


IHS numbers came in at 79.9 million subscribers, which is actually less than what the company has provided, but hitting the 100 million level doesn't feel impossible. However, that 75 million international subscriber level by 2020 is big.

IHS sees $13 billion in revenue for Netflix by 2020, with 53% coming from the International markets. One thing Netflix has consistently delivered is revenue growth. Here is an all-time revenue chart:


Source: CMLviz


You get that same chart, or any chart, for any company here: Financial Charts.

The author has no position in Netflix stock.

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