Netflix's International Headwinds Appear Muted; Jefferies Upgrades Stock

Following a survey of consumers in Germany and India, to estimate the opportunity for Netflix, Inc. NFLX in these two key markets, Jefferies’ John Janedis reported that the growth opportunity appeared to be larger than expected, “as original content is performing well, mobile consumption is growing, competition appears limited, and the pricing plan is gaining traction.”

The analyst upgraded the stock's rating from Underperform to Hold, while raising the price target from $95 to $135.

Better Than Expected

Janedis explained that part of the negative stance on Netflix was based on expectations of competition from local players, as well as flatter subscriber growth and higher churn due to a consistent global price point.

However, the recent survey indicated Netflix was possibly gaining share from local platforms, with Indian SVOD respondents revealing that while 74 percent subscribed to Amazon.com, Inc.’s AMZN Prime Video, 63 percent subscribed to Netflix, with 41 percent subscribing to both.

On the other hand, in Germany, 67 percent subscribed to Prime Video, while 45 percent subscribed to Netflix and 21 percent subscribed to both.

Related Link: The Bears In Netflix Are Highly Outnumbered

Gaining Share From Locals

In addition, 84 percent of the Indian respondents and 50 percent of the German respondents said they consumed video through mobile, with 54 percent of the Indian respondents saying that they used the download function often.

“As mobile viewing grows, we believe NFLX's investment in video delivery / optimization could be particularly important.” Janedis states.

The survey also revealed both the Indian and German respondents favored the original content from Netflix, followed closely by the licensed TV content and movies.

“As NFLX offers a limited amount of local content the outperformance of originals across multiple regions has been a key growth driver,” the analyst noted.

Moreover, only 6 percent of the Indian respondents said that they wouldn't accept a price increase, as compared to 32 percent in Germany.