Boston, MA 04/21/2014 (wallstreetpr) – No matter how rough the year 2014 has been so far for Netflix, Inc. (NASDAQ:NFLX), but if an analyst Evan Wilson of Pacific Crest Securities is to be believed then the company holds the potential to touch $500 mark soon. Netflix’s recent move to grow international forms the basis of this assumption, which could pick up speed in the next 18 months, according to the Wilson. If everything falls in place then the company could beat the subscriber and revenue estimates in 2016. Netflix’s development in the international regions can be referenced from its latest addition of 1.74 million subscribers in the fourth quarter. Moreover, the company anticipates adding 1.6 million more international subscribers in the first quarter as it sees innumerable opportunities ahead. Wilson noted that since the international margins look solid than the U.S., therefore; Netflix, Inc. (NASDAQ:NFLX)’s profitability in the area could either match or even exceed the U.S. margins.
Parity With TV
Wilson strongly feels that Netflix, Inc. (NASDAQ:NFLX) has space to hike its prices based on the value quotient, its 31.7 million paying subscribers are getting. Moreover, there is a wide disparity between the subscription fee of Netflix and that of conventional TV channels. The research firm notes that where Netflix charges $0.16 per hour viewed, TV subscribers pay $0.50, hence giving an opportunity to Netflix to increase its subscription prices. The analyst estimate that a mere $1 increase in the company’s average revenue per user (ARPU) would enhance its 2016 operating income by 84% to $1.61 billion. If the increase happens over the next forthcoming years, then Netflix users would have to pay $25 per month, way higher than the existing price of $8 a month.
Additionally, Wilson believes that the company can unlock the value in its strong over-the-top (OTT) streaming services by adding a revenue stream through ad-supported video. While Price Waterhouse Coopers estimates the global ad market at $160 billion, Netflix, Inc. (NASDAQ:NFLX) till date has a zero share in it, making it an interesting prospect to pursue. Apart from being an influential OTT player, Netflix’s cost of content an hour is widely lower than to that of Comcast, giving it a chance to buy more content cheaper.
Big 2015, Bigger 2016
All this and promising opportunity lie ahead for Netflix, as it gears up to launch in developed countries of Europe this year. The area, in particular, offers the company to not to be profitable for this year but also for the next year. If Netflix, Inc. (NASDAQ:NFLX)’s adoption pace replicate its existing rate, it could easily get another 5 million international subscribers in 2015, and 10 million by 2016.
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