Can Overseas Subscriber Growth Boost Netflix's Q4 Earnings?

International subscriber growth, which plays a major role in driving Netflix's (NASDAQ:NFLX) revenues, is expected to lend better support to its fourth-quarter 2017 results — scheduled to be released on Jan 22.

Netflix’s focus on developing original regional content portfolio has paid off in the recent past. The company added 4.45 million overseas subscribers in the last reported quarter, much more than its expectation of 3.65 million.

International Streaming revenues (41.8% of total revenue) soared 53.7% year over year to $1.165 billion driven by an increase in paid members. The company also reported profits from its international operations in the last reported quarter.

Notably, shares of Netflix have gained 63.2% in the past year, significantly outperforming the industry’s17.7% rally.

Positive Expectations

For the fourth quarter, management expects to add 5.05 million subscribers in the international segment.

For the fourth quarter, the Zacks Consensus Estimate for total number of international subscribers is 61.6 million, up 38.8% from the reported number in the year-ago quarter. Paid international subscribers are expected to increase by 38.8% to more than 57 million from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for total revenues from international segment is pegged at $1.56 billion, indicating a 63.6% increase from the figure reported in the prior-year quarter.

Netflix, Inc. Revenue (TTM)

Netflix, Inc. Revenue (TTM) | Netflix, Inc. Quote

Click here to know how the company’s overall Q4 performance is expected to be.

Portfolio Strength Helps in Expansion

Netflix had a very strong programming slate in the fourth quarter of 2017. An original German series named Dark and the second season of The Crown series — based on the life of Queen Elizabeth II — launched by the company in December are gaining popularity worldwide. Bright, which released in the same month, had more international viewers than domestic ones.

Netflix’s aggressive original content expansion in markets like Latin America, Europe and Asia reflects the growing adoption of the service in the countries. The company’s service is currently available in 190 countries. As of now, it offers content in over 24 languages and plans to take the count higher.

Zacks Rank and Key Picks

Netflix carries a Zacks Rank #3 (Hold).

Intercontinental Hotels Group (NYSE:IHG) , Penn National Gaming Inc. (NASDAQ:PENN) and Sony Corp (NYSE:SNE) are some of the better-ranked stocks in the consumer discretionary sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Penn National Gaming and Sony are expected to release earnings on Feb 1, while Intercontinental Hotels Group is expected to announce its results on Feb 20.

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