This integration was planned in 2011; however, the company couldn’t go forward with the plan. 2013 is probably the best year for the company to integrate with Facebook as it plans to release several more titles later this year. The Facebook deal will obviously not push up the stock price; however, its a good long-term opportunity to make the brand even bigger.
Netflix’s investment into foreign markets is another thing to be optimistic about. The company has invested heavily in the European markets and continues to push their brand name and services in international markets as more and more people around the world are adapting to the Internet TV trend.
If Netflix, Inc. (NASDAQ:NFLX) continues to invest in its original content and deals with various studios, then the subscriber count will definitely increase. Investing in these areas might mean a cash outflow in the short run, but an increase in overall revenue in the long run.
Netflix: The Bad
One of the reasons why some analysts don’t see Netflix growing in the future is Amazon’s entry into the market. Amazon is a far bigger brand name than Netflix, as it has a popular e-commerce division, along with a massive library of books. Even though Netflix has the most subscribers, Amazon is slowly getting there–it reached the 10 million mark last year.
If Amazon can take the right decisions, it can literally destroy Netflix. The company has already invested in original content creation and has an extensive library for its readers. The integration opportunities for Amazon are numerous, as they have several different divisions. Integrating its streaming service with other divisions like the Amazon Kindle and its library of books are just two such opportunities for the company. Not only will this improve the Amazon Prime service, but this will also improve the performance of other divisions. What Netflix has done with Facebook, Amazon can do several times within its own company.
The decline of Netflix’s DVD segment is another thing to be worried about. Hastings admitted that the DVD division will continue to decline forever and that the company moved too fast. He also stated that the profitability of the streaming service is twice than the DVD segment and that the company tried to satisfy both types of customers. Netflix needs to either grow its streaming service in the international markets or it needs to invest in something new in order to counter the decline of its DVD division.
Conclusion
Netflix, Inc. (NASDAQ:NFLX) remains a decent company with great growth potential for the future. It already pleased some of its investors when the stock grew over 200%. The Internet TV industry is going nowhere as more and more people from different countries are adapting this latest trend. RedBox and other relatively new streaming services have also entered into the industry. The growth of Internet TV, along with Netflix’s huge consumer base, offers a lot to be optimistic about. However, the risk factor involved is mainly due to competition as Amazon tries to put Netflix out of business. Amazon’s global brand recognition and its future strategies will definitely impact Netflix in one way or another. Netflix remains a very interesting stock with very high capital gain potential, but at the cost of severe risk, which I believe is worth taking.
The article Netflix: A Stock Worth The Risk originally appeared on Fool.com and is written by Yasir Idrees.
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