Netflix’s (NADAQ:NFLX) content portfolio is firing on all cylinders, which is evident from the massive number of Emmy nominations it received this year, topping HBO.
Netflix’s plan of creating a huge number of original shows has helped the company dominate the streaming market despite stiff competition from Amazon’s (NASDAQ:AMZN) Prime service, Hulu, Facebook’s (NASDAQ:FB) Watch and Apple’s (NASDAQ:AAPL) Music app.
Further, Disney’s (NYSE:DIS) upcoming streaming service is expected to increase competition in the long haul.
NFLX Relying on Star Power to Drive Content
Netflix is also snapping up Hollywood talent to boost its movie business. Partnerships with prolific creators like Ryan Murphy, Shonda Rhimes, Shawn Levy and Jenji Kohan will boost Netflix’s original content expansion strategy. The company plans to release 80 original movies in 2018.
NFLX’s chief content officer Ted Sarandos disclosed at the MoffettNathanson Media & Communications Summit that the company is set to release 470 originals by 2018, which will take the total count for the year to nearly 1,000.
Moreover, according to a recent article, Netflix is rumored to spend around $2 billion on original content in 2018.
These initiatives are in turn expected to positively impact the financials of the company. The Zacks Consensus Estimate for second-quarter 2018 revenues indicates growth of 41.3%.
Subscriber Growth to Wane: Deutsche Bank Warns
However, in a recent report, CNBC stated that Deutsche Bank had warned its clients about NFLX missing its “second-quarter subscriber expectations”. The article further stated that the addition of U.S. net members might miss the Wall Street consensus by 500,000 subscribers for the quarter.
Given the not-so-encouraging statement from the analyst firm, the company’s shares dived around 4.3% on Jul 13. Nevertheless, it should be noted that the company has rallied a whopping 144.8%, outperforming the industry’s gain of 41.5% over the past year.
At the end of first-quarter 2018, NFLX had 125 million subscribers globally. Netflix’s paid streaming members across the globe were 118.9 million, up 26% from the prior-year quarter.
In the second-quarter of 2018, management expects to add 1.2 million subscribers in the domestic streaming segment and 5 million subscribers in the international segment, which is a bit conservative compared with the past quarters.
The slightly muted guidance for subscriber additions, the company’s higher-priced subscription plan along with Deutsche Bank’s prediction about the company missing market expectations, keep us slightly cautious about this Zacks Rank #3 (Hold) stock.
However, NFLX’s ongoing initiatives for content creation, market share wins and growing an international market presence bode well for its long-term growth.
You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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