Home Technology Should Netflix, Inc. Slow Growth Rate Worry Investors?

Should Netflix, Inc. Slow Growth Rate Worry Investors?

When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs.

Netflix, Inc. (NASDAQ:NFLX) has tasted success around the globe, and the company has emerged as one of the most-loved stocks by investors. Shares hit an all-time high of around $500 per share in September, but since then they are down 27%.

Investors concerned with growth rate

In a normal course, the start-up grew and eventually become a multi billion company like Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) and many others. However, new media companies are growing at a rate far lesser than investors anticipated, says a report from Yahoo! Inc. (NASDAQ:YHOO).

Not only Netflix, but other companies such as Pandora Media Inc (NYSE:P) and Twitter Inc (NYSE:TWTR) are also making investors worried. Investors are concerned with Netflix’s limited subscriber growth and are having more conservative views on the company’s audience size compared to previous expectations. Unless the company begins getting a growing pool of audience again, it will have to face investors’ questions. However, Netflix has the strongest chance of improving its condition because it has already started expanding internationally.

Netflix CEO Reed Hastings has been asserting again and again that the online streaming company is eying 60 million to 90 million United States subscribers. Last month, CEO Hastings threw an open challenge to traditional TV companies, saying their days are numbered probably 2030. Hastings compared traditional TV companies to a horse, saying it was good until we had cars. However, competitive headwinds caused a slow-down in user growth, and a much-needed price increase has not set well with subscribers.

Netflix continues with expansion plans

Netflix expanded its subscriber base by one million to two million subscribers every quarter, surging from 24 million paying members two years ago to 30 million last year and hitting 35 million in the second quarter. However, over the past two quarters, the company has not posted in-line numbers, adding 570,000 members in the second quarter and 980,000 members in the third quarter, which are lower for both quarters compared to the previous year’s growth. But the decline in the growth rate, along with intense competition, has concerned investors.

Despite the slow-down, Hastings is moving forward with his overseas expansion plans. In September, the service was launched in France, Germany and other European countries. International subscribers are earning the company less profit, which could change once Netflix gains scale. There are just 16 million non-U.S. members, which means the company has more room for growth.

Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Aman Jain
Personal Finance Writer

Want Financial Guidance Sent Straight to You?

  • Pop your email in the box, and you'll receive bi-weekly emails from ValueWalk.
  • We never send spam — only the latest financial news and guides to help you take charge of your financial future.