Netflix Stock Analysis: New European Shows and Movies are a Driving Factor for Success

This article was written by David Berger, a Financial Analyst at I Know First and Finance student at the University of Michigan’s Ross School of Business.

Netflix Stock Analysis: New European Shows and Movies are a Driving Factor for Success

Netflix Stock Analysis


  • European Spending Will Increase Subscription Base
  • High Quality European Content Should Increase Usage
  • Amsterdam Hub Will Boost Local Content


European Spending Will Increase Subscription Base:

As Netflix (NFLX) continues its domination over cable networks, the European market seems to be a consistent point of emphasis. Therefore, Netflix is expected to start working on increasing its European content. This will be initiated via a $1.75 billion investment into creating strictly European content. This should boost subscription growth in Europe. Netflix added over 14 million new subscribers in Europe in 2016, compared to 4 million in the United States. NFLX also increased its revenue per paying customer by 4% in 2016, compared to a decline of 10% in 2015. While Europeans enjoy American content, creating content specifically designed for Europe should enhance usage. It will create a cultural connection to Netflix for Europeans, which should lead to an even higher growth rate of subscribers. Netflix projects to spend $15.3 billion on original content, up from $12.3 billion a year ago.

Netflix Stock Analysis


According to a report by PwC, Netflix and other streaming services will have greater revenue than box office movie theaters by 2020. Additionally, DVD and Blu-Ray sales will see a steady decline over the same timeframe.

High Quality European Content Should Increase Usage:

NFLX invests a lot in original content, but mostly in American shows. House of Cards, Orange is the New Black, and 13 Reasons Why are hits around the world, but Netflix is attempting to create smaller hit shows that connect with its increasing European market. Netflix content is currently available in 13 languages. Over 90 original Netflix programs are in the works across Europe. Marseille and The Crown are top European shows which will be renewed for a 2nd season, according to Netflix. Moving into a new market, Netflix cannot expect every show to be a hit. However, Netflix can continue creating high quality content like it has in the U.S. There are bound to be some big hits among the 90 programs Netflix is creating.

Netflix Stock Analysis

Amsterdam Hub Will Boost Local Content:

To handle this increased production, Netflix announced 400 new jobs across Europe. Moreover, Netflix will add a European hub in Amsterdam. Netflix’s European headquarters in Amsterdam will receive the most new employees. The jobs will be within 11 different European countries, giving Netflix a strong presence across Europe. With people stationed across Europe, Netflix will be able to create more original local content. These jobs create country-specific content capabilities, an even greater advantage than creating general European shows and movies. Netflix expects to add at least 6 new European shows because of these hires.

The benefits created by Netflix’s investment may not be realized until Q3 or Q4 of 2017 , but Netflix is still a great long-term buy. The buy rating for NFLX is backed by the positive algorithmic forecasts from I Know First. Over the next few months and the next year, NFLX projects to be higher than its current $152.38 share price.

Netflix Stock Analysis

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Past I Know First Success With NFLX

I Know First has been bullish on NFLX shares. In one such case, on September 15, 2016, I know First issued a bullish article highlighting Netflix’s continued trend in revenue increase. Netflix has been investing its future by expanding abroad to maintain high growth rates. These factors, along with favorable consumer trend of cutting its cords with the cable companies have greatly benefited Netflix. Since the article’s release, NFLX shares have increased by 57.83%.



(Source: Google Finance)

This bullish forecast for NFLX was sent to I Know First subscribers on September 15, 2016. To subscribe today click here.