Expert: Netflix Could Reach 150 Million Subscribers In 5 Years

Netflix, Inc. NFLX reported massive subscriber growth in the first quarter that might have overshadowed the company's overall earnings results. "Nobody's looking at the earnings beat," Cody Willard, chairman of Scutify (a financial social network), told Benzinga. "The catalyst is all about subscriber growth. People aren't buying Netflix with a $30 billion market cap because it's beating earnings. They're looking out and saying this thing is really starting to hit critical mass to becoming the de facto standard for watching TV and movies." Willard said that Netflix has the "possibility" of reaching more than a billion subscribers, but he doesn't actually believe the company will pull that off. "To be clear, I'm not expecting it to get to more than a few hundred million [subscribers] at most," he said. "Let's look at annual. The thing about critical mass is, when you get there, the numbers can actually accelerate. It's possible, though unlikely, that Netflix could be at 100 million paying subscribers in the next two years -- 150 million in five years."

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Balancing Act

Willard said that Netflix must continue to "balance shareholder demands for profitability versus outright subscriber growth versus how quickly they can acquire content." "[Founder and CEO] Reed Hastings, who was a guest on my show several times back on Fox, has been a visionary and created this industry before anybody else did," said Willard. "If you're investing in Netflix at a $30 billion market cap, you're betting on some great leadership."

'Enough Great Content'

Netflix is the dominant player with more than 60 million subscribers globally, but Hulu, HBO Now and others offer alternative viewing options. Should investors think of them as complementary or competing services? "There's a bit of both elements," said Willard. "They are both competitive and complementary. If you're comparing over-the-top streaming TV and movies versus cable and satellite subscription models, well, then they're complementary. If you're truly looking at the over-the-top…consumers have to look at price. There will be choices to make. Reed has to continue to do an amazing job of getting enough great content on his network so people will clamor for [Netflix] over the others."

'Noise In Every Quarter'

As for the earnings beat (or miss, depending on how investors look at it), Willard said that there is "noise in every quarter." "At a high-growth company like Netflix, there's absolutely noise in the number and the bottom line," he explained. "I think investors and shorts at this point are looking at top-line growth and subscriber growth and not paying much attention to the earnings themselves." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.