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Netflix Scales the U.S. Video Subscription Mountain

Netflix ( NFLX ) recently released Q1 2011 earnings and based on continued growth in subscribers and revenue, we have updated our price estimate for Netflix's stock to $153 - our price estimate still stands significantly below market price. Although Netflix's business model is unique, it still competes with Apple's ( AAPL ) iTunes, Hulu, video on demand (VoD) services from pay-TV providers like Comcast ( CMCSA ), Time Warner Cable ( TWC ) and others. Apart from this, it competes with other specialized movie rental companies like Redbox and will soon be challenged by a rejuvenated Blockbuster under the backing of Dish Network ( DISH ).

Rapid Subscriber Growth is Still There

Surprisingly, Netflix's net subscriber additions each quarter is continuing a rapid growth pace despite the company's already large subscriber base . Excluding Q2 2010, the company's net quarterly subscriber additions have been continuously increasing from about 1.7 million in Q1 2010 to about 3.6 million in Q1 2011. Interestingly, international expansion in Canada played a small part in this growth so far - meaning that Netflix has been able to sustain its momentum in the U.S.

An interesting point here is that, with about 22.8 million domestic subscribers, Netflix seems to have surpassed Comcast's U.S. subscriber base to become the biggest video subscription service in the country.

Now the question that arises is, from here to where? Netflix plans to continue its international expansion in other markets given the success that it has seen in Canada. And there's still room to grow in the U.S. if the company can keep its prices low while also improving content.

See our complete analysis for Netflix stock here

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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