Netflix is struggling to add US subscribers — but a new analysis shows why its international growth is primed to explode higher

  • Netflix’s subscriber base has more growth potential than previously thought, according to a new analysis from PiperJaffray.
  • Michael Olson, a senior analyst at PiperJaffray, calculated Netflix’s total addressable market using internet households, rather than the standard of broadband households.
  • The analysis determined that Netflix has more attractive growth prospects in international markets.
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Netflix’s market is about to get a lot more crowded with other streaming platforms, but the company might still have space to expand its business.

Michael Olson, a senior analyst at Piper Jaffray, reevaluated the size of Netflix’s market and found that the streaming company still has room to grow its subscriber base in international markets.

In the past, Olson and his team calculated Netflix’s total addressable market using the total number of fixed broadband households. But as the potential for mobile-only subscribers increases, that metric may be too restrictive.

Olson’s new approach to calculating Netflix’s market size hardly changed the company’s penetration in the US, but it showed greater potential in increasingly important international markets. The analysis estimates the size of the mobile-only international internet household market excluding China to be about 575 million.

“When looking at current Netflix adoption as a percentage of internet or pay-TV households, we see international significantly lagging domestic, suggesting potential for dramatic international growth in the coming years.” Olson said in research not to clients on Thursday.


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Based on Piper Jaffray’s analysis, Netflix has an 18% market share of international broadband households excluding China. In terms of internet households, which would include mobile subscribers, Netflix only has an 8% market share internationally, representing greater upside and more opportunities for growth.

In recent quarters, the company has found it difficult to add US subscribers. Netflix’s predicts it can add 300,000 US subscribers next quarter, which is less than half of Wall Street’s expectation of 650,000. According to SEC filings, Netflix had about 149 million subscribers as of March 2019.

This report comes as major competitors to Netflix such as Apple,Disney, NBCUniversal, and AT&T’s WarnerMedia have all released plans to launch their own streaming platforms in the US.

Netflix has begun to spend huge amounts of money on original content to cope with companies like Disney and NBCUniversal pulling content from its platform to offer it exlusively on their own streaming services in the future. According to Netflix’s SEC filing from the first quarter of 2019, the company’s subscriber levels can be impacted by content.

NBCUniversal recently announced it would pay $US500 million to take its hit show “The Office” off of Netflix in 2021 and bring it to own ad-supported streaming platform slated to launch sometime in 2020. Disney’s new streaming platform, Disney+, is scheduled to be released in November with blockbuster titles from Marvel and Pixar that used to be found on Netflix.

PiperJaffray currently has an overweight rating and a $US440 price target for Netflix. Shares of Netflix are up as much as 42% since the start of the year.

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