In a bid to cater to the 50 million-strong Spanish-speaking
population and strengthen its subscriber base in the US,
Netflix Inc
(
NFLX
) is currently in talks with Univision Communications Inc, a
Spanish language media company, according to Bloomberg. Netflix
already shares a healthy business relationship with Univision, as
the latter provides online content for the company in Latin
American countries.
The essentials of the deal are still under wraps but it is
expected that Netflix is set to stream popular shows from the
largest Spanish language broadcaster Grupo Televisa SAB (
TV
).
Amid increasing competition from domestic streaming providers
such as HBO,
Amazon.com Inc.
(
AMZN
) and Hulu, the addition of Univision in Netflix's portfolio
provides a much-needed boost. Newly launched services from cable
and media companies, such as
Comcast Corp.
(
CMCSA
),
Dish Network Corp.
(
DISH
) and
Verizon Communications
(
VZ
) also remains a challenge for Netflix. Despite the threats from
some of the bellwethers in the industry, Netflix remains focused on
boosting its streaming portfolio with varied content.
Netflix's recent licensing deals include a multi-year exclusive
licensing deal with The Weinstein Company that will enable the
former to stream TWC-produced movies online within one year of
their theatrical release. Apart from the licensing deals to stream
movies, the company has been picking up exclusive distribution
rights to third party productions, such as "Lilyhammer" (premiered
on February 6). The company is also reviving Fox's canceled TV
series "Arrested Development," which is expected to be streamed in
the first half of 2013.
Moreover, to diversify its streaming content and make it worth
watching, Netflix is building its original content portfolio. The
company has acquired the rights to a number of original series such
as the comedy series "Orange Is the New Black," and the political
drama "House of Cards" in 2011. Netflix is expected to stream five
original series within the first half of 2013.
In the recently concluded quarter, Netflix gained 600K
subscribers (both domestic and international), with the domestic
subscriber base growing by approximately 220k.
We believe that Netflix's improving content portfolio and
international expansion are primarily responsible for the
significant expansion of its subscriber base. This would ultimately
enable the company to strengthen its position over the long
term.
However, higher capital expenditures arising from international
expansion will hurt earnings growth in the near term, in our view.
Moreover, Netflix had earlier raised $400 million in cash through
stock offerings at $70 per share and convertible bonds, in order to
develop its streaming library and to fund its international
expansion.
Additionally, Netflix's future growth and strategy is entirely
based on the online streaming business, as its DVD rental business
continues to witness subscriber losses. We believe that the
streaming market is getting overcrowded and will hurt Netflix's
margins going forward.
We have a Neutral recommendation on Netflix over the long term.
Currently, Netflix has a Zacks #3 Rank, which implies a Hold rating
over the short term.
AMAZON.COM INC (
AMZN
): Free Stock Analysis Report
COMCAST CORP A (
CMCSA
): Free Stock Analysis Report
DISH NETWORK CP (
DISH
): Free Stock Analysis Report
NETFLIX INC (
NFLX
): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research