Netflix: Not As Bad As It Seems

Summary

NFLX's domestic subs miss appears to be a function of market saturation and competitive pressure, which should be expected given the recent growth of rivals and OTT penetration.

International subs remain a key focus, with China, India, Korea and Japan presenting multiple runways for NFLX to grow.

Remain bullish. Share pullback presents an attractive opportunity.

While Netflix's (NASDAQ:NFLX) domestic subscriber net adds missed consensus and guidance by a wide margin, international subscriber net adds remain strong. Given that NFLX already has solid penetration in the US, international sub growth perhaps should be the greater focus, in my view.

In the near term, I expect domestic sub growth to moderate due to market saturation and incremental increases in competitive pressure. As for international, the company is expected to be fully global by the end of next year, which suggests that key Asian destinations such as China, India and Korea all have a high probability of becoming the next drivers to NFLX's sub and revenue growth. Among the major OTT companies globally, NFLX is best positioned with its original content and...