NFLX Stock Prediction For 2016: Why Netflix Has A Great 2016 Ahead

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

NFLX Stock Prediction

  • Apple has suspended its planned live-TV subscription servicenflx stock prediction
  • Netflix is the runaway leader in connected pay TV. Without Apple, no other worthy rival will contest this leadership of Netflix.
  • International expansion will help Netflix grow it subscribers.
  • Baidu could serve as a local partner to hasten Netflix’s entry in China.
  • Creating more original content is a great long-term strategy to reduce licensing fees.

 

Apple’s (AAPL) alleged suspension of its plan to launch a pay live-TV streaming service is one great reason to go long on Netflix (NLFX). I firmly believe that Apple’s retreat means Netflix will remain the king of subscription-based TV/ video streaming. Without Apple’s meddling, the double-digit growth in subscribers and revenue of Netflix will most likely continue next year.

Just like Amazon (AMZN), Netflix touts one of the greatest-performing stocks of 2015. NFLX’s +147.17% YTD performance this year is evidence that many retail and institutional investors love the growth potential of Netflix. Compared to AAPL’s YTD performance, NFLX truly had a great 2015. I regret that I missed profiting from this momo stock.

nflx stock prediction

(Source: Google Finance)

 

International Expansion

It is still reasonable to go long on NFLX. The upcoming China expansion is a big step forward for Netflix. That country of more than 1.4 billion is the next obvious growth catalyst for Netflix. North America is near saturation point for video streaming. Netflix therefore needs China and its huge pool of internet-connected people to find more susbcribers. Netflix only has 28% of the global subscription-based video streaming business. Getting inside China could double this because of that country’s rising middle-class that could easily afford premium TV/video subscriptions.

In spite of rampant piracy, China’s online video streaming industry will still post $5.8 billion in revenue this year. There’s obviously big money to be made in that country’s subscription-only TV streaming industry. I believe that Alibaba’s (BABA) recent launch of its own paid video streaming service is a compelling reason for Netflix to also enter China. Netflix only needs to find a local firm like Baidu (BIDU) as a partner to ease its entry in China.

A local partner is always a key toward getting a license to operate in China. Microsoft (MSFT) tapped Baidu’s help to promote Windows 10 in China. Amazon also hired Baidu to help it sell its Android Fire TV tablets in that country.

Netflix and Baidu could try to match the RMB 39 ($6.10) monthly subscription fee of Alibaba’s Tmall Box Office subscription TV/Video streaming service.

Competing well in China requires foreign firms like Netflix to cater to lower-income customers. Beating Tmall Box Office also requires Netflix to offer a competitive monthly subscription fee.  As the long-time leader in internet pay-TV, Netflix certainly has the bigger library of content than Tmall Box Office can offer now. However, this will not be enough of an excuse to charge a higher fee. Unlike Americans who do not mind the $10/month fee of Netflix, Chinese buyers will likely ignore Netflix’s future service in China if it is more expensive than Alibaba’s offer.

 

Developing More Original Content

Yes, Netflix will have to pay more licensing fees to cable/broadcast TV/movie content owners over international streaming rights. It will be a costly endeavor for Netflix if it to rely too much on third-party content. Content owners will likely charge more money if Netflix use their content in other countries.

The problem is Netflix cannot expect to succeed in China and Asia using its current $10/month service. It is therefore urgent for Netflix to develop further its library of original shows to help reduce the costs of its international expansion. It will be much cheaper for Netflix to internationalize its hit U.S. shows in China rather than rely on third-party content.

Netflix already has a great track record of successful TV shows. This is something that Netflix must do to reduce its overhead over third party content licensing.   Instead of allocating billions of dollars toward paying third-party content owners, Netflix should use of it to develop and popularize its own original TV shows and movies. The long-term viability of Netflix will greatly depend on how well it can develop its own library of original shows.

HBO became super-successful in the international cable TV industry because of its aggressive production of original content. Netflix can use the HBO formula to grow its international subscription-only streaming video service.

I heartily agree with management’s plan to double the number of Netflix’s original shows in 2016. Producing original content is risky. However, coming up with its own exclusive shows help retain the interest of current subscribers. New original shows also attract new subscribers.

 

My Takeaway

Momentum growth-minded investors should consider adding Netflix to their 2016 portfolio. Without Apple’s possible entry, Netflix will remain the undisputed leader in subscription-only TV streaming. Hulu Plus, Sling TV, and HBO Now are too small to challenge Netflix’s dominance. Millions of iPhone/iPad/Mac owners will continue to pay for Netflix subscriptions to get their daily entertainment fix.

My positive outlook for Netflix is also supported by the bullish algorithmic forecasts of I Know First.

I Know First Research, A FinTech Company that created a state of the art algorithm that predicts over 3,000 markets on daily basis. Their algorithm has very bullish algorithmic forecast for NFLX. According to the analysis of I Know First, market trends favor the probability that NFLX’s price will rise in price within the next 90 days.

nflx stock prediction

The favorable NFLX algorithmic forecasts from I Know First are also supported by the Buy signals from long-term technical indicators and moving averages.

nflx stock prediction

 (Source: Investing.com)

I Know First previously on the 21st of November 2014  forecasted the 20 Top Stocks for a 1 year period 10 out of the 10 stocks increased in the long and 8 out of 10 increased from the short position in accordance with the algorithm’s prediction. NFLX was part of this forecast returning 135.48%. The I Know First package averaged a return of 30.84% in a 1 year period outperforming the S&P500 that only returned 1.77%.

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A bit more on the algorithm.

Recognizing a positive signal strength with the algorithm does not mean investors should automatically buy the stock. Dr. Roitman, who created the algorithm, created rules for entry for a stock such as Apple. Using this trading strategy, an investor should buy a stock if the last 5 signal strength’s average is positive and if the last closing price is above the 5-day moving average price. When both of these conditions are met, it is a good time to initiate a position in the stock.

For more algorithmic articles on Netflix:

I Know First Review: NFLX Journey To New Markets

Netflix Stock Forecast: Netflix Investors Should Consider Profit Taking At These Prices (NFLX)

NFLX Stock Prediction: Bullish Algorithmic Forecast

Netflix Stock Predictions: Why Netflix Will Continue To Climb – An Algorithmic Analysis (NFLX)

Netflix Stock Forecast: Netflix Is Still A Good Value: An Algorithmic Analysis (NFLX)


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