Netflix Inc. – purveyor of the hit series House of Cards and Orange is the New Black – has had an outstanding run.
The Los Gatos, Ca.-based
video-streaming company that offers an "all-you-can-eat" menu of movies, TV shows and original programming over the
Internet closed out 2013 with
an eye-popping 300-per-cent return.
It has won critical kudos for its decision to invest heavily in new, high-quality series. Last year's Emmy for political drama House of Cards was the first victory in a major category for an online video distributor.
The company's chief executive, Reed Hastings, is spearheading a move to transform Netflix into a major content provider, putting it in direct competition with established premium cable players such as HBO and Showtime. Will the streak continue into 2014?
The stock market darling is at a crucial juncture, facing such challenges as the need to grab enough new subscribers to
help pay for the costly new productions, a stock price in the $300 (U.S.) range that many
analysts believe is unsustainable, and a U.S. federal appeals court ruling that could result in having to pay a toll for the large amount of bandwidth it uses.
These and other concerns are likely to be on the agenda when Netflix unveils fourth-quarter earnings and holds a conference call Wednesday.
Morgan Stanley analyst Scott Devitt recently downgraded the stock and lowered his target price to $310 per share from $333, noting that HBO and Amazon are a threat with huge opportunities to develop their respective video streaming services.
"We believe digital video distribution has become largely commoditized and it may be easier for some Netflix competitors to gain their next five million users than it will be for Netflix," he said.
Another threat is Hulu, which has a massive TV catalogue from ABC, NBC and Fox.
Wedbush Securities analyst Michael Pachter said Netflix
will likely "guide to a number [of new subscribers] that is
lower than last year and the Street is not going to like
In the last quarter, Netflix
had 31.1 million streaming subscribers and 9.2 international streaming subscribers, according to media research firm SNL Kagan.
Colin Dixon, chief analyst at nScreen Media, expects a good fourth quarter.
"They'll probably end up the year with between 33 million and 34 million U.S. subscribers and will probably have an even better international year – just shy of 11 million," he said.