Netflix Stock Hits All-Time High After Latin America, Caribbean Expansion Announced

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NEW YORK - Netflix Inc. said Tuesday that it will expand its streaming service to 43 countries throughout Latin America and the Caribbean later this year.

Netflix shares rose sharply and set an all-time high of $291.23 before closing up 8.1 percent at $289.63. That gave the company a market capitalization of $15.2 billion.

Members in the new region will be able to access its streaming service in Spanish, Portuguese or English, Netflix said. The company added that Netflix members from Mexico, Central America, South America and the Caribbean will be able to instantly watch an array of American, local and global TV shows and movies on their TVs via consumer electronics devices capable of streaming from Netflix, as well as on PCs, Macs and mobile devices.

It didn't immediately detail an exact launch date or pricing.

Netflix has been streaming to U.S. members since 2007, and it expanded the streaming service to Canada last year.
The company had previously said that it would spend more on international expansion as it looks to establish a presence beyond North America. Analysts have predicted that Netflix could also look at a U.K. launch.

"This is a significant positive for Netflix as it expands its service into significantly larger international markets," said BMO Capital Markets analyst Edward Williams who has a "market perform" rating and a $210 target price on Netflix's stock. "With approximately 40 million broadband internet connections in Latin America and growing, we believe this expansion provides the company with additional subscriber growth opportunity and also makes the company a more attractive partner for content providers seeking to monetize their assets."

Barclays Capital analyst Anthony DiClemente, who has an "overweight" rating with a $315 target price on Netflix, said Tuesday's news compares favorably to his previous expectation that Netflix would first launch in either Mexico or Brazil and then expand to other countries in the region. "This announcement significantly expands Netflix's total addressable market in Latin America and likely makes our ending subscriber estimates for 2012 of 42.7 million (+37 percent) somewhat conservative," he said. "Brazil, Mexico and Argentina are the largest broadband markets in the region representing approximatelt 75 percent of total Latin American broadband households, and we would expect Netflix to focus marketing efforts primarily across these largest markets, although we'd expect strong word-of-mouth benefits across the region as a result."

DiClemente, who also said that he has "always viewed international expansion as a major growth area for Netflix," expects pricing to be similar to the $7.99 per month unlimited streaming price point in the U.S.

Lazard Capital Markets analyst Barton Crockett, who has a "neutral" rating on the stock, also highlighted some of the positives of Tuesday's news, but also cautioned about the risks. "International sounds great in theory, but execution risks are notable, with non U.S. markets spending less on video entertainment, potentially limiting the market opportunity," he said. "Netflix's brand is less well known [outside the U.S.] Also, we see international regulators facing pressure to regulate Netflix like a media company, potentially subjecting it to debilitating local ownership restraints."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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