Text size
Photograph by Lionel Bonaventure/AFP via Getty Images
Netflix
is growing everywhere it goes. That is one of the obvious takeaways from the company’s disclosure of new, detailed data about its business, broken down by region.
The company previously reported domestic and international data on revenue, subscribers, and average revenue per user, but without further geographic detail. Late Monday, the company offered figures for four major areas: the U.S. and Canada; Latin America; Asia-Pacific; and Europe, the Middle East and Africa.
While there were no big surprises in the data, investors always prefer more detailed disclosure. The stock is trading higher following the release of the information via a filing with the Securities and Exchange Commission.
As noted late Monday, the figures vividly illustrate how the maturing of the company’s business at home has been more than offset by rapid growth in other regions.
The new data goes back to March 2017. Since that time, the subscriber base in the U.S. and Canada has increased by 12.5 million, or 23%, while growth in the EMEA region was 27.7 million, or 140%. Over the same period, Latin America has grown by 14 million subscribers, or 90%. The subscriber base in Asia-Pacific has grown by 9.8 million, or 211%.
The additional data highlighting the dynamics of the business outside the U.S. will give analysts more to consider, and talk about. More data is generally better than less when it comes to securities analysis.
“We believe the change adds clarity to sources of international growth, which we view favorably from a disclosure standpoint,” KeyBanc Capital Markets analyst Andy Hargreaves wrote in a research note. “Among other things, the data suggests EMEA has been the primary driver of international revenue and subscriber growth.”
SunTrust Robinson Humphrey’s Matthew Thornton biggest takeaway is that the company has signed on a larger share of Latin American homes than he had expected, with 37% of the region’s broadband households now members. That compares to 55% penetration in the U.S. and Canada, 18% in EMEA, and 9% in the Asian-Pacific region.
Morgan Stanley’s Benjamin Swinburne also was impressed with the continued strong growth in Latin America, a market that Netflix entered eight years ago. He wrote in a research note that the Asia-Pacific subscriber base is smaller than he had expected, but that the region “appears to be on track to see an acceleration in total paid adds for 2019.”
Swinburne added that he continues to see sustainable growth in average revenue per user led by more mature markets, saying recent price increases are clearly boosting revenue and free cash flow.
Raymond James analyst Justin Patterson wrote that given the new disclosures, his previous forecast for 2020 growth—net additions of 2.8 million subscribers in the U.S. and 27 million internationally—“appears very achievable” and that the expansion overseas could be better than he had thought.
He added that revenue from the Asian-Pacific region is about where sales in Latin America were in early 2017, saying the markets are intrinsically similar, and that APAC will become a more material contributor to growth over the next two to three years. In the U.S. and Canada, he added, the story is now about pricing, rather than subscriber growth, which he thinks is fine. “Achieving net add growth and double-digit price increases is an outcome telecom and media companies envy,” he wrote.
Netflix stock rose 3.4% to $314.63 on Tuesday.
Write to Eric J. Savitz at [email protected]
