Investors Should Steer Clear of Netflix

Netflix continues to expand its streaming base, ending the quarter with 89.1 million global paid subscribers, up from 70.8 million a year ago. The international expansion continues to track ahead of expectations on the subscriber side, as Netflix now has 41.2 million paid international streaming subscribers, up from 36.8 million last quarter and 27.4 million a year ago. Revenue and total segment contribution came in above our expectations as the U.S. segment continues to benefit from the firm’s recent price increases. Average revenue per user in the U.S. improved by 15% year over year to $9.91 per month. Marketing as a percentage of revenue for the U.S. came in at 7.5%, up 30 basis points from the year-ago quarter. We will continue to monitor this line item, as the firm may need to ramp up its marketing spend to build up awareness of its library, which is increasingly skewed toward original content.

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