Netflix, Inc. (NASDAQ:NFLX) has performed well in 2013, which to many is a positive surprise. Over the last year or so, shares of the company have jumped from $50 to $350. Now, since the year is almost over, there are questions about how Netflix will fare in the next year. A report from Seeking Alpha by Bill Maurer tries to answer the same concerns by analyzing key issues facing the company.
International expansion, when and how?
The streaming company in its investor letter mentioned that it plans to explore new markets next year, but the big question here is which market and at what time. Netflix, Inc. (NASDAQ:NFLX) may enter big markets like the UK or it may also opt for smaller markets like the Netherlands. According to Maurer, international expansion holds massive potential for Netflix, and provided the growth trajectory continues, the company may even pocket more than $1 billion in revenues during 2014. However, Maurer believes that when Netflix expands into more geographies, the incremental expenses may lower the profitability for a quarter or two at least.
What to do with DVD segment?
One of the strategic decisions that Netflix, Inc. (NASDAQ:NFLX) may have to make in the next couple of years is to decide the fate of its DVD segment, whether to close it or continue with the segment. According to the author, considering the present growth scenario it will better if Netflix holds on to the “DVD business for a little while longer,” as the segment is profitable, and profits “have not declined as much as expected.”
Will Netflix raise prices again?
Another important decision that Netflix, Inc. (NASDAQ:NFLX) will have to make is whether or not to raise prices, and if yes then by how much? The company raised its prices in 2011, which was not welcomed by investors. However, to maintain growth, Netflix will most likely need to raise prices again. The author confirms “most Netflix subscribers I’ve talked to would be fine with another dollar or two raise for the service.”
Still some potential for upside
In 2012, the streaming company stated that its Q3 2012 results might be impacted by the Summer Olympics. The same concern may have to be addressed again as the Winter Olympics are nearing. The company would have to provide some details on this matter in the fourth quarter earnings call. The event, according to the author, may lower the guidance for the first quarter.
Apart from these, Maurer mentioned many other valid points or questions that Netflix, Inc. (NASDAQ:NFLX) needs to address. The author believes that the stock still has more potential for upside, basing his decision on the price-to-sales ratio, and adds “I’d probably wait for the next pullback” to initiate a position in the stock.
