Netflix, Inc. (NFLX) Still A “Buy” Despite Subscription Concerns: Stifel Nicolaus

Stifel Nicolaus has opted to upgrade Netflix, Inc. (NASDAQ:NFLX) to a ‘Buy’ from a’ Hold’, despite holding huge reservation that a further decline in subscription numbers could plummet the stock even further in the market. During an interview on CNBC, the firm’s senior research analyst, Scott Devitt, reiterated that a decline in subscriptions in the U.S could, on the other hand, be offset by the ongoing growth in international markets.

“Last quarter, the third quarter the company started to show indication of making a transition where international growth is becoming a bigger contributor to growth. With that, the transition is somewhat tricky because the U.S business drives more of the profitability of the company,” said Mr. Devitt.

Netflix, Inc. (NASDAQ:NFLX) has plummeted to levels it was trading at after reporting below par third quarter earnings last year;  having been affected by concerns about the ongoing decline in subscriptions back at home. The analyst remains confident that the ongoing growth of subscription on the international market could push the stock up, by a further 30% going forward.

The analyst also affirms that Netflix, Inc. (NASDAQ:NFLX) could plummet a further 10-15% in instances where the growth in subscriptions does not gain momentum as highly expected. Devitt also affirms that Netflix is the better option when compared to HBO with its market cap of $20 billion compared to the latter’s $30 billion, which is expected to offer the biggest test in terms of competition going forward.

Despite recent concerns about Netflix, Inc. (NASDAQ:NFLX) growth rate, the analyst asserts that the company is poised to grow at a higher rate based on its business model compared to those of its competitors.

“If you think about the comparative growth characteristics of Netflix, Inc. (NASDAQ:NFLX) vs. HBO, Netflix is going to grow at a faster rate. They have a better business model because it is direct, and they can offer better prices to consumers even if HBO chooses to go direct,” said Mr. Devitt.

 Push for international growth according to the analyst should be one of the drivers behind the company’s subscriptions in the long term, having been under immense scrutiny from the Street.

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