UPDATED with closing price. Netflix stock rose nearly 4% Tuesday — the biggest move on an otherwise sleepy day for media and technology shares — after investors absorbed newly released global subscriber data.
The stock surpassed $316, its highest level in three weeks, before closing at $315.48 on heavier-than-normal trading volume. While Netflix shares spent several months under water in recent months, gains over the past few weeks have pushed them into positive territory for the year to date.
In an SEC filing Monday, the streaming giant followed through on its promise to change the way it reports subscriber totals and revenue. The filing laid out nearly three years’ worth of financial results, broken out by four global regions: the U.S. and Canada; Europe, the Middle East and Africa; Latin America and Asia-Pacific. The takeaway, as several Wall Street analysts noted Tuesday, was a strong sense of the international growth story, which has been under way for several years.
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U.S. subscriber levels have flattened of late, prompting a few Wall Street media and tech watchers to wave a caution flag, especially with Disney, Apple, WarnerMedia and NBCUniversal now entering the streaming arena with major new offerings.
A debate has been percolating for months in industry and financial circles about the long-term trajectory of Netflix. Bears view the company as a debt-dependent spendthrift beset by new rivals, while bulls venerate it as a first mover with a sizable tech and talent advantage.
Morgan Stanley analyst Ben Swinburne has an “overweight” (buy) rating on Netflix shares, with a 12-month price target of $400. In a note to clients Tuesday, he wrote that Netflix’s pricing power is “intact” in many areas of the world, in contrast to the perception that it is somewhat vulnerable on price in the U.S. “Strong growth in even emerging markets like Latin America highlights the ability to sustain growth years after launch, with opportunity ahead in Asia,” Swinburne wrote.
Michael Morris, an analyst with Guggenheim, also has a “buy” on Netflix shares. In a note to clients on Tuesday, he indicated several reasons for “value creation optimism,” among them rising broadband penetration rates in some developing parts of the world.
“As Netflix continues to pursue global growth, we expect the company will experiment with and in multiple cases deploy lower price point offers to expand the user base. Important to value creation will be the input cost to pursue these lower-average monthly revenue subscribers. We believe that Netflix financial performance will incrementally reflect the scale benefit of global content investments, which are characterized by both broad consumer appeal across cultures (particularly with the significant expansion of film content) and uniform global availability across markets.”
Rich Greenfield of Lightshed Partners, a prolific and consistently pro-Netflix voice on social media, wrote in a blog post that the new numbers were not surprising but help support the bull case for the company. “Simply put,” Greenfield and his partners wrote, “the global growth opportunity is significant, particularly as Netflix leverages a large U.S. content base and invests heavily in local/regional content. It is not hard to imagine Netflix reaching 200-250 million international subscribers in the future.”
Netflix, which reported having 158 million subscribers as of the third quarter, will report its fourth-quarter and full-year results on January 21.
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