Netflix Stock Continues Rally and Touches New High Triggered by User Growth
Netflix has become favorite stock among investors as the company continues to report positive news on its subscriber base and exclusive content deals with new partners. Netflix has been able to deal with competition and the company has clearly emerged as market leader. On Thursday morning, Netflix stock jumped by 6 percent as the company announced better-than-expected earnings. In its quarter four results, Netflix reported strong growth in user base in the United States. Netflix has managed even better growth in international markets.
During fourth quarter, Netflix added two million subscribers in the United States. In international market, Netflix added 5 million users during Q4. Netflix is continuously spending big money on new content and the company has been aggressive in paying content providers. Some analysts are concerned about massive payment outgo for fresh content while others feel that spending more money on content will ensure that Netflix remains popular among its current as well as new user base. Due to higher spending on content, Netflix has witnessed slight decline in margins. In year 2017, Netflix can see further decline in margins but the growth in user base has been able to neutralize that decline.
In first quarter of 2017, Netflix has plans to launch 42 original content items for its subscriber base. In 2016, Netflix has spent $1.66 billion on new content. In 2017, the cost of fresh content can go up to $2 million, the company informed. Netflix also signed an exclusive deal with Jerry Seinfeld for ‘Comedians in Cars Getting Coffee’.
Deutsche Bank analyst Bryan Kraft reiterated his hold rating and $110 price target. Kraft added, “We continue to view Netflix’s business outlook and growth opportunity favorably, however, at this valuation level, we don’t see a favorable risk/reward.”
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