Mark Mahaney Lays Down The Biggest Challenge Netflix Faces To Keep The Uptrend Alive

Shares of streaming giant Netflix, Inc. NFLX have had an unprecedented rise of more than 25 percent since the company released its second-quarter earnings on July 15. However, the company faces big obstacles and challenges in the near future that can put an end to this rise.

Mark Mahaney, RBC Capital Markets lead Internet analyst, was on CNBC Wednesday to discuss those challenges.

The Challenges

"I think, the biggest pothole I am worried about with Netflix is they are doing a series of international launches all at the same time from a company run out of Los Gatos, California," Mahaney began."I hope they get that execution right. It's a very hard trick they are trying to pull off, that many international launches at the same time. In terms of content however, I think, the bigger risk is really behind them on this. The bigger they get, the more leverage they have with the studios."

Valuation And Expenses

On Netflix's current valuation and expenses, Mahaney said, "Look, this stock is not inexpensive here. It's expensive and you have to be able to look at on the sum of the parts basis and you have to be willing to go out a year or two to be willing to buy this stock here. So, it has shifted down in our list of buys. In terms of them moving costs from the U.S. to the international markets -- I have heard that short thesis -- you can cut through that right away."

"Look at their overall streaming revenue, look at their overall [cog], so, you can get rid of the geographical mix shift and you can see that they are showing more leverage against the streaming cost. And this shouldn't be a surprise, these are largely fixed costs, you pay $100 million for the third season of XYZ show, the more subs you get, the more leverage you get," Mahaney said.