Netflix, Inc. (NASDAQ:NFLX) warning that it expects subscriptions on the international front to grow at a slower pace further affirms why it needs to change how it operates. Customizing content to meet the needs of different niche markets is the only way the streaming giant will be able to offset growth headwinds abroad.
International Expansion Risks
Netflix, Inc. (NASDAQ:NFLX) has been expanding abroad all in the effort of boosting its subscription base. It now expects 2 million new subscribers on the international front against Wall Street expectation of 3.5 million new additions. The cautious outlook has already had a catastrophic impact having spooked investors sending the stock crashing by 13%.
Slow growth on the international front underscores the challenges the tech giant is facing as it continues to look for new opportunities for growth. An expansion into non-English speaking nations has forced the company to spend more in a bid of bolstering its library with more local content. Even though it is the right call, investors remain wary of what the spending push will have on profit margins in the short term.
Analyst’s Bearish Tone
Mizuho analyst Neil Doshi has already trimmed expectations on the stock having become wary of what is at stake with expansion drive
“We believe this highlights the increasing challenges facing the company as it expands into more non-English speaking countries and countries with more localized content,” said Mr. Doshi. The analyst currently has a ‘neutral’ rating on the stock.
Eight brokerage firms have already trimmed their price target on the stock having become worried of what the future holds for Netflix. Analysts at JPMorgan Securities believe the company needs to add more languages and local content if it is to offset growth headwinds.
The company already offers subtitles in 18 languages, but that may not be enough if it is to realize its desired growth metrics. Competition back at home from the likes of Amazon.com, Inc. (NASDAQ:AMZN) and Hulu is another concern that continues to spook investors.
Wedbush analysts Michael Patcher believes the recent move by Amazon to reposition Prime Video as a standalone service could spell more trouble for Netflix, Inc.(NASDAQ:NFLX).