3 Reasons Netflix, Inc. (NFLX) Stock Is Bouncing Back: Europe, Brazil, Mexico

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Netflix stock - 3 Reasons Netflix, Inc. (NFLX) Stock Is Bouncing Back: Europe, Brazil, Mexico

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It was just 10 years ago that Netflix, Inc. (NFLX) was strictly a DVD-by-mail enterprise and Blockbuster was still in business. Now Blockbuster and every other video rental store are long gone and Netflix is primarily a streaming video service used in more than 130 countries around the world.

3 Reasons Netflix Stock Is Bouncing Back: Europe, Brazil, Mexico (NFLX) Put in its proper perspective, Netflix is still in its infancy — and so is NFLX stock. Globally, Netflix is just scratching the surface of its potential. Recent data from various parts of the world reflect that.

Global Growth Should Boost Netflix Stock

Piper Jaffray surveyed 2,000 internet users in Brazil and Mexico, and most of those polled were not only aware of Netflix, but intended to subscribe.

Meanwhile, an RBC Capital survey in France and Germany found that 37% of all French residents and 32% of all Germans said they are “extremely” or “very” likely to pay for streaming content, up from 21% and 20%, respectively, in December 2014. Netflix penetration in those two countries is up to 16% from a mere 4%-5% just 18 months ago. It’s now the No. 2 streaming video on-demand provider in each market.

Lastly, UBS’ Doug Mitchelson reiterated a “buy” rating for Netflix stock after examining the online video markets in France, Germany, the U.K., Italy and Spain. Despite strong competition from local competitors, Netflix is well positioned for growth in each of those five markets, Mitchelson said.

Today, NFLX has 81 million subscribers worldwide, 42% of which were located outside the U.S. It’s now available in 130 countries, with China the only glaring exception. In the first quarter, NFLX added 6.7 million subscribers, 4.5 million of which came from overseas.

The company’s international growth should only accelerate: analysts estimate that by 2020, it will have more than 100 million non-U.S. subscribers — nearly 20 million more than its total current subscriber count!

According to investment bank MKM Partners, the peak years for subscriber growth after Netflix becomes available in a country is three to seven years. Among developed countries, just 20% have entered those “peak” years.

Netflix is still trying to net China, its elusive white whale; but even without it, the company’s international growth is booming, and is on the brink of becoming half its revenues.

As Netflix reaches a saturation point here in the U.S., and with growing competition in the online video space from the likes of Amazon.com, Inc. (AMZN) and Hulu, it has clearly turned its attention outside our borders. You can see it in some of the company’s original programming, which includes critically acclaimed shows such as “Narcos” (set in Colombia), “Club de Cuervos” (Mexico) and “Marseille” (France).

CEO Reed Hastings said the goal is to eventually reach a point where 80% of its subscribers come from outside the U.S., much like Facebook Inc (FB) and Alphabet Inc‘s (GOOG, GOOGL) YouTube, though he concedes it has “a lot of international growth to go before we can aspire to that.”

Considering how much it has grown in the last 10 years, I wouldn’t bet against them getting there. Since 2010, Netflix has gone from 509,000 international subscriber additions per year to 11.75 million. During that time, Netflix stock has increased more than 1,100%, going from a mere $7 a share at the start of 2010 to $96 as of this morning.

Ideal Entry Point for NFLX Stock

And from a technical standpoint, now is the perfect time to buy NFLX. The stock peaked at $130 in December before dipping as low as $82 in February. It made a run back to $111 by tax day, only to go tumbling back to double-digit share prices.

Netflix stock currently trades below its 50- and 200-day moving averages, though it’s flirting with the former. If it breaches $97, which is roughly the 50-day moving average, I think that will make for a nice entry point.

That said, I think NFLX stock is a smart long-term buy at virtually any price. The company is just now tapping into its potential in many corners of the globe, and hasn’t even broken into the world’s second-largest market yet. Ten years from now, Netflix’s global footprint could dwarf what it looks like today.

Should that happen as expected, Netflix stock could look a lot bigger by then too.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.

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