Netflix Margins Will Beat Long-Term Consensus On 'Global' Licensing Expansion, Nomura Proclaims

In a report published Thursday, Nomura analyst Anthony DiClemente maintained a Buy rating on Netflix, Inc. NFLX, while raising the price target from $600 to $750. Netflix is poised to benefit from a growing mix of global content license agreements and post improved operating margins. Penetration into the Chinese market represents a major opportunity for the company's international expansion. "In our view, given scale economics, international contribution margins in the long-term are likely to achieve parity or better relative to steady-state domestic contribution margins of 40%," analyst Anthony DiClemente mentioned. In the report Nomura noted, "Netflix's international subscriber base will be 65% larger than its domestic subscriber base by 2020E (94mn international vs 58mn domestic), and as such, fixed global content license fees will be spread across a greater number of subscribers." Even as the company is eyeing an entry into new international markets, the average YoY growth across its current five largest international markets is expected to be 20-25 percent CAGR through 2020. "We estimate that major legacy international markets including the UK, Brazil, Canada, Germany, France, and Mexico should deliver a combined 28mn net additions through 2020E, and grow at a combined CAGR of 23% between 2014 and 2020E," DiClemente added.