Netflix (NFLX) sees the Europe, Middle East, and Africa region as a lynchpin for ongoing revenue expansion, with the streaming service expressing that view as its shares soared on a robust fourth-quarter revenue performance.
Efforts to boost paid-sharing accounts bolstered sign-ups, Chief Financial Officer Spencer Neumann said on the company’s conference call, according to a Capital IQ transcript. Netflix added 5.05 million paid subscribers in EMEA during the fourth quarter, higher than in other regions. Revenue in the region jumped almost 19% to $2.78 billion in the quarter and was up 13% on a currency-neutral basis, Neumann said.
“It starts with great slate performance,” Neumann said. He cited shows like the UK royal family drama ‘The Crown,’ French thriller ‘Lupin’ and Polish comedy ‘1670’. “I’ll say, very importantly, it’s not just net adds,” he added. “Our primary focus is on revenue growth. We had very strong revenue growth as a result of that in EMEA this past quarter.”
Netflix is finding strength in its local-content portfolio, Morgan Stanley said in a note Wednesday. “The region with the largest outperformance in 4Q may have been EMEA, where original content in the UK, France, and Spain drove upside,” the investment firm said, raising its price target on Netflix shares to $600 from $550 while reiterating an overweight rating. “Given that the largest opportunity ahead for Netflix is outside the US, this local content strength is important.”
Investors propelled the shares up by 13% Wednesday, building on an afterhours surge Tuesday after the company delivered stronger-than-expected fourth-quarter membership growth and revenue. Global paid net additions of 13.1 million outstripped the 8.8 million increase expected in a Visible Alpha consensus. Total revenue climbed 13% to $8.83 billion, beating the $8.71 billion consensus estimate on Capital IQ.
The company forecast double-digit revenue growth this year on a currency-neutral basis driven by higher membership and improvement in average revenue per membership “as we adjust prices,” it said in a shareholder letter.
Netflix separately on Tuesday said it signed a long-term deal with TKO Group’s (TKO) World Wrestling Entertainment unit to stream its ‘Raw’ flagship show and other events. The deal has a 10-year initial term for a total rights fee of more than $5 billion.
“For decades, the WWE has grown this multigenerational fan base that we believe we could serve and we can grow. We believe that WWE has been historically under-distributed outside of North America. And this is a global deal,” co-Chief Executive Ted Sarandos said on the earnings call. “This should also add some fuel to our new and growing ad business.”
The streaming service “remains the best story in media among the vertically integrated producers/programmers/distributors,” Deutsche Bank analyst Bryan Kraft said in a note. “However, we think that Netflix’s leadership position is now fully priced into the stock at these levels,” he said, downgrading the stock to hold from buy.