International Growth Could Triple Netflix's Subscribers

Streaming provider Netflix (NASDAQ:NFLX) is undoubtedly one of the most successful growth stories in the technology realm. The company has exceeded 30% year-over-year growth in revenue in each of the last five quarters. Even more impressive is the company’s subscriber growth, which has surpassed 19% in every quarter going all the way back to the end of 2012. Those additions have accelerated recently, growing an average of 24% over the past four quarters.

That growth has added up, with Netflix now boasting 125 million subscribers globally. As impressive as the number is, the company may just be getting started — one analyst believes Netflix will continue its strong membership growth, with subscribers topping 360 million by 2030.

A smiling girl wearing headphones and looking at a tablet

Image source: Getty Images.

Just the beginning

Nat Schindler of Bank of America Merrill Lynch is reiterating his buy rating on Netflix, and raising his target price to $352. “We believe,” he said, that “Netflix still has a considerable opportunity ahead if it can achieve reasonable penetration levels internationally. Netflix will face varying levels of competition, regulation, and economic conditions in each individual market it participates in, but its content scale should allow it to become the dominant streaming player in virtually all markets.”

The analyst thinks Netflix can grow its customer numbers by 8% annually between now and 2030, which would result in a massive subscriber base of 360 million members. Schindler believes that Netflix will eventually achieve penetration in 35% of all broadband households worldwide, excluding China, “which we think is reasonable,” he said. A review of the company’s recent customer additions bears that out:


Q1 2018

Q4 2017

Q3 2017

Q2 2017

Total subscribers

125.00 million

117.58 million

109.25 million

103.95 million

Year-over-year growth





Data source: Netflix quarterly earnings releases.

If Netflix’s growth continues at anything near the current rate, Schindler’s estimates could be easily achievable.

The cost will be high

It’s important to note that sometimes investors have followed Netflix customer additions to the exclusion of all else. Netflix plans to spend between $7.5 billion and $8 billion on original content this year, and expects its cash flow for 2018 to be in a range of negative $3 billion to negative $4 billion.

The company has taken on significant debt to finance its growing library of shows; even as its negative cash flow has grown, the investing community has judged Netflix solely on its ability to grow its already massive customer base.

Netflix has claimed that the company’s cash burn is, in fact, a gauge of its success. According to Netflix CEO Reed Hastings: “The irony is the faster we grow, and the faster we grow owned originals, the more drawn on free cash flow that will be. … In some senses the negative free cash flow will be an indicator of enormous success.”

Seeing it from Netflix’s perspective

Some are beginning to come around to that view. Moody’s recently raised its credit rating on Netflix, based on the company’s increasing revenue and expanding subscriber growth. Moody’s analyst Neil Begley believes Netflix will exceed 200 million subscribers as early as 2021, and the company will be cash flow positive by 2022.

I don’t think any die-hard Netflix bears are going to change their views based on the calculations of a couple of analysts. I also don’t think that those that are sold on the company and its ongoing growth story will be convinced they’re wrong.

That reminds me of the old adage: For those who believe, no explanation is necessary. For those who do not, no explanation is possible.

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