Netflix's (NFLX) International User Base to Drive Q4 Earnings

Netflix 's NFLX expanding international footprint is likely to drive its fourth-quarter 2018 results, which is scheduled to be reported on Jan 17.

The streaming platform's efforts to attract viewers through investments in regional programming have added significantly to its user base. In the las t report ed quarter, Netflix added 5.87 million subscribers, better than projections of 4.35 million.

More importantly, International paid members were 73.46 million, up 39.4% from the year-ago quarter. The company added 5.07 million paid members in the quarter.

This drove International Streaming revenues, which soared 48.7% year over year to $1.97 billion, and accounted for 49.3% of total revenues.

Netflix projects international revenues to exceed domestic revenues in the to-be-reported quarter. International streaming revenues are expected to be $1.97 billion. The Zacks Consensus Estimate for fourth-quarter International revenues is $2.12 billion.

Click here to know how the company's overall Q4 performance is expected to be.

Asia & India Focus: Key Catalyst

Netflix's focus on regional programming has strengthened its content portfolio. The company is working on projects across India, Mexico, Spain, Italy, Germany, Brazil, France, Turkey, and the entire Middle East.

Some of the shows are 3% (Brazil), Dogs of Berlin and Parfum (Germany), Elite (Spain), Il Miracolo (Italy), Safe (France), Fauda (Israel), Narcos: Mexico, and Memories of the Alhambra and Kingdom (Korea).

Netflix, Inc. Revenue (TTM)

Netflix, Inc. Revenue (TTM) | Netflix, Inc. Quote

As China remains elusive to Netflix, the company is focusing on expanding its footprint in India and other Asian countries. Following Sacred Games, Netflix streamed Ghoul in India in the last reported quarter. Late fourth quarter, the company released Selection Day, its third original series in the country.

Additionally, Netflix has strengthened its footprint in Japan and Korea through the launch of anime series Devilman Crybaby and variety show Busted!, respectively, in 2018.

Intensifying Competition to Hurt

However, competition is also intensifying in the international markets, not only from regional players but also from U.S.-based players like Amazon AMZN , Alphabet's GOOGL YouTube and Facebook FB . These companies are spending heavily on regional content to increase user base.

It is worth noting that free streaming content from Facebook and YouTube is likely to put Netflix's pricing strategy under stress, particularly in the Southeast Asia. YouTube is also mulling an ad-free paid streaming platform, YouTube Premium, in India.

Moreover, Amazon Prime, which offers host of services apart from video streaming, is gaining rapid traction in these regions, primarily due to its competitive pricing structure.

Nevertheless, investments in promoting local content are providing Netflix a competitive edge against its peers. The company's aggressive expansion into the international markets supported by a whopping budget ($8 billion for new content production) is a major growth driver.

These initiatives are expected to boost international subscriber base in the fourth quarter. Netflix anticipates adding 7.60 million subscribers in the international segment, much more than 1.80 million subscribers expected in the domestic streaming segment.

Netflix currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here .

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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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