Netflix has gotten a new lease on life — or perhaps just renewed its subscription.
The stock stayed in the green Thursday after an 8% post-earnings move, ending the trading session with a more than 2% gain. The move was a welcome reprieve from a few painful months for Netflix shares, which are up just under 10% year to date.
But concerns around the streaming giant's growth prospects — and encroaching competition — still linger.
Here's what four experts see ahead for the stock:
Rich Greenfield, co-founding partner of technology, media and telecommunications analysis firm LightShed Partners, said Netflix has a lot to prove after "a major miss in Q2":
"The international number was disastrous, and I think you had a lot of investors fearful that the international story was over, because remember: as you think about the next five years for Netflix, the next 10 years, 90%-95% of the growth was coming from overseas. And so when the international story hit a wall last quarter, people panicked. And you look at what happened to the stock on the chart. That was fear of international. So, coming in and actually exceeding expectations for Q3 was a really big sign. … When you look at a company that's got almost 160 million subscribers, given the size now that they're at, I think forecasting subscribers on a quarterly basis is really hard. The thing that's going to move the stock over the next 12 months is do they start to see a reacceleration in global subscribers?"
Michael Graham, head of U.S. equity research and an internet analyst at Canaccord Genuity, said this quarter may have marked a turning point for the company:
"I think the biggest thing is last quarter, domestic subscribers declined sequentially, and they returned to growth this quarter. I think that's the big thing. … The big point that the company was trying to make last night is that all those streaming packages are trying to take share away from the typical cable subscription, which is robust. I mean, Netflix at $12, 13 a month is a small amount compared to what most households pay for a cable bill."
Laura Martin, senior analyst at Needham, said the next thing Wall Street needs to focus on is revenue per user, or RPU — and that it could spell trouble for Netflix's stock:
"The issue's going to be that RPU is going to come more into focus as you start adding $3 mobile-only subs[cribers] in these developing countries. I think the Street is going to make finer granularity about what kind of quality subs offshore Netflix is adding. And I think a stock that trades at seven times revenue, which is where Netflix is down to, can't sustain a negative sub growth anywhere in the world, and that includes the U.S. So, I think as you get increasingly bundled sub adds from Amazon and Apple and Disney, it's going to be harder for Netflix to maintain a positive subscriber growth in the U.S. … I sort of think it's going to get worse and worse as you get more and more competitors with double-A balance sheets and huge cash hoards that Netflix is required to compete against now."
Brian Wieser, global president of business intelligence at media investment giant GroupM, warned that rivals may have a difficult time catching up to Netflix on content because "if you're not in with, like, $5 billion, you're not really a player":
"At least in the United States, I think that the amount of time people can devote to what we call television is relatively limited, and Netflix and all of the new services are going to be competing for that time. I don't really think they're competing with Fortnite, as was indicated a few quarters ago. … The cash burn issue is the point. If they can … find a way to keep the sub growth going while they're burning cash and keep investors along for the ride, then they'll be fine. But the reality is that ... everyone else is coming up, if they're willing to step up with money to pay for content. That's not a given. Apple had $1 billion of content. That's a nice kind of entry point, [but] it's not clear that everyone else that's playing will show up."
