Netflix, Inc. (NASDAQ:NFLX) is enjoying a surge in demand in the UK, which is a positive development in the context of its ongoing expansion into European countries including France and Germany, says a report from Baird Equity based on the monthly UK survey. In a report dated June 2, 2014, analysts William V. Power, Steven J. Beckert and Andrew T. Flis note that market is ripe for the company to expand, and the mix of Hollywood, local languages and original content will offer a compelling value proposition and a sustainable edge over competitors.
Higher penetration for Netflix in UK
The analysts noted that in their consumer monthly survey during the month of May, Netflix showed a penetration rate of 17% in the United Kingdom compared to 9% in January and 12% in March, almost doubling over the past few months. The same level of growth is expected In the second quarter.
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The online video streaming company added two million international subscribers in the first quarter compared to 1.4 million in the previous year same quarter. Analysts are anticipating the company to slow down to around one million new adds in the second quarter, still well above 683,000 in the previous year same period.
The United Kingdom market is very competitive with number of players, but Netflix, Inc. (NASDAQ:NFLX) has already gained substantial traction, which indicates the potential success of the company in rest of the Europe as well. Netflix will provide tough competition to Amazon Lovefilm in Germany; at least the UK experience suggests so.
Potential for further international expansion
In Europe, France and Germany are big markets for Netflix, Inc. (NASDAQ:NFLX), where there are 53 million broadband homes compared to 90 millions in the United States. Analysts are expecting 16.8 million paid international net additions in 2014, and 24.9 million in 2015, compared to 9.7 million in 2013.
In the coming years, Netflix, Inc. (NASDAQ:NFLX) will also expand into Southern Europe and parts of Asia. By 2020, analysts are expecting that Netflix will reach 74.2 million international subscribers including markets other than those already announced. This would represent approximately 34% of broadband households compared to 40% in the United States presently.
After hitting a two-year low of $53.87 on August 2, 2012, Netflix, Inc. (NASDAQ:NFLX) shares have gained an impressive 676%, compared to 46% for the SPDR S&P 500 (SPY). However, there are analysts who consider the stock is overbought at the moment, but it can be bought at this point as well rather than anticipating a price correction like in April. Orange in the New Black Season 2 will start on June 6th and third season has been given a green signal to.