RBC’s Mark Mahaney Cheers Netflix, Inc.’s (NFLX) Rising International Competitive Position


Netflix, Inc. (NASDAQ:NFLX) may be sliding a tad on the satisfaction ladder in the U.S., but top analyst Mark Mahaney at RBC Capital is bullish on the online video streaming giant for its “strong and stable” valuation for the long-term. One reason points to international performance looking stellar, with penetration and satisfaction largely escalating, particularly in France, leaving Mahaney cheering, “Volants!… That’s French for Flywheels…”

After sending out surveys to respondents in the U.S., Germany, and France, the analyst reiterates an Outperform rating on shares of NFLX with a $175 price target, which represents a just under 15% increase from where the stock is currently trading.

Domestic satisfaction in Netflix movies and television dipped from 55% in February to 23%, but long-term trends still prove encouraging, considering YouTube at 46% and Amazon at its all-time peak of 32% still swim under the giant. Levels of those who are “extremely” or “very satisfied” also fell to 68% compared to 72% of Netflix subscribers in February, and churn likewise has climbed from 5.2% in February to 6.6% of subscribers who are “very likely” or “extremely likely” to cancel. Yet, the analyst notes content selection is improving, with a “record” 55% praising the giant for this, and “tiering power” soaring with a “record” 24% opting for a $11.19 Premium Plan subscription.

Netflix’s strength in Germany and “especially” in France is clear to Mahaney, who notes a rise in willingness to pay for streaming content and the best penetration rate as well as satisfaction in France yet, with 91% of French subscribers indicating high satisfaction and usage. There also are signs of “More Evidence Of ‘Tiering Power,'” elaborates the analyst, who believes, “Both France and Germany NFLX Sub bases showing shift to Premium subscription plans (26% & 30%). Netflix’s competitive positioning and penetration continue to improve in Europe.”

Meanwhile, there is “Localization Momentum In International Markets,” continues the analyst, who opines, “Since Fall ’16, Netflix has localized services in Poland, Turkey, Thailand, Romania & Israel. It has localized payments, subbed & dubbed content into local languages & produced Original Content. Google Trends data shows localization has materially impacted usage. Google Trends reveals that Netflix is seeing a surge in Search interest (close to 12-month highs) in each of these markets. With a 30MM broadband HH base, we believe these markets can contribute 3MM new Subs in 12-24 months.”

Ultimately, “2017 [is] Shaping Up To Be A Very Robust Original Content Year For Netflix,” contends Mahaney, who looks ahead to 50 shows of new Original programming, from television series to Netflix original movies set to be launched throughout the next year, with around two released weekly.

Mark Mahaney has a very good TipRanks score with a 73% success rate and a high ranking of #14 out of 4,569 analysts. Mahaney gains 21.7% in his annual returns. When recommending NFLX, Mahaney garners 42.6% in average profits on the stock.

TipRanks analytics show NFLX as a Buy. Based on 30 analysts polled by TipRanks in the last 3 months, 20 rate a Buy on Netflix stock, 9 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $163.14, marking a nearly 8% upside from where the stock is currently trading.