Member Article

Has Netflix already peaked or are these more growing pains?

Global video streaming giant Netflix has weathered its share of ups and downs, and most analysts today say it is poised for yet another comeback.

Afterall, this is a company that has managed to shift its business model from mail-order DVDs to online video streaming over the course of the last decade. But, those looking to buy Netflix stock, should also be aware of continuing challenges, such as slow international growth and signs of stagnation in its U.S. customer base.

In April, shares of Netflix fell steeply after it issued second-quarter guidance, including the slower-than- expected number of anticipated new customers. And the shares have yet to bounce back, down more than 11 percent since that mid-April report.

Despite that, many Wall Street analysts maintain a buy rating on the stock, meaning they see strong potential for gains. Fueling the optimism for Netflix is the growing trend of cord-cutting, or people getting rid of traditional cable services and simply streaming content instead.

Netflix remains the industry leader in streaming services, and is taking concrete steps to enhance that position, including offering premium original content and expanding into overseas markets.

Increasing its U.S. subscriber base is, however, key to the continued growth of its profits and stock price, and Netflix faces increasing competition from the likes of Amazon and Hulu, who are also catering to those dropping traditional cable television services. These other players are also offering Netflix competition on its quest to expand abroad to make up for softness in the U.S. market.

Netflix currently draws about 40% of its customers from outside of the United States, but is spending heavily to increase that to half of all its total subscribers.

Such efforts have been mixed, depending on location, but have not been as fruitful as Netflix had hoped, causing some questions and concerns for investors.

So if someone is looking to buy Netflix stock, there seems to be a need to balance the company’s past performance—including its pivot from a now obsolete mail order DVD program to online streaming industry leader—with the unknown future it is charting with its new original content production and global reach.

Graph of stock price over the past month:

http://finance.yahoo.com/echarts?s=NFLX+Interactive#{"range":"1mo","allowChartStacking":true}

This was posted in Bdaily's Members' News section by Boris Dzhingarov .