Netflix may already be in half of all US homes, but it's still growing like crazy

Netflix is now a household name, recognised across the entire US. And that’s probably because more than half of the nation’s broadband households have access to a subscription.

With such a high household penetration rate, you’d think Netflix’s growth would start to slow. But according to Ben Swinburne, an analyst at Morgan Stanley, the company’s subscription numbers and profitability will continue to skyrocket.

“The supposedly mature US market added essentially the same number of customers in ’17 as ’16, as we see new distribution platforms (MVPDs like Comcast and Verizon, mobile carriers like T-Mobile) embracing Netflix,” Swinburne wrote in a note to clients.

The company reported 49.4 million US subscribers in 2016 and had 52.7 million in its most recent quarter. Netflix is set to report fourth-quarter earnings on January 22.

Throughout the rest of the world, Netflix is growing even faster. Swinburne says that younger markets tend to add subscribers more quickly than developed ones, and notes that Netflix’s large library of original content will help subscriber numbers in those fledgling regions expand even faster than in previous years.

In 2016, Netflix could be found in about 9% of broadband-enabled homes around the world. In 2017, Swinburne expects that number to grow to 13%, and says it will hit 20% by 2023.

All of this growth will lead Netflix to a healthy bottom line, predicts Swinburne. The company added about $US3 billion in revenue last year, but only $US450 million of that growth was left after the company invested heavily in programming. This year, Swinburne expects Netflix to add $US1 billion of incremental earnings before interest and taxes.

“Despite emerging with the largest global content (ex sports rights) budget in history and boasting a global marketing budget that is akin to that of a major US Hollywood studio, Netflix should still drive meaningful profit growth,” wrote Swinburne.

Swinburne raised his price target for Netflix from $US235 to $US255, about 17% higher than the company’s current price.

Read about how Disney is coming to eat Netflix’s lunch.

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