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Netflix to Stream UFC in Canada

Zacks Equity Research

Netflix Inc. (NFLX) has added some content specifically for its Canadian subscribers, who will now be able to stream both contemporary and classic matches from the Ultimate Fighting Championship (:UFC), a mixed martial arts (:MMA) program.

Netflix subscribers will be able to watch UFC programs like UFC Best Of, Ultimate KO, 100 Greatest Moments and Ultimate Heavyweights, as well as the documentary Bad Blood that features Canadian MMA stars like Mark Hominick, Rory MacDonald and Sam Stout along with a host of international players like Georges St-Pierre, Anderson Silva and Jon Jones to name a few.  

In the recently concluded quarter, Canada was the strongest of its international ventures, according to Netflix. The company’s subscriber base nearly doubled when compared with the year-ago quarter. Netflix has been adding content through licensing agreements with Canadian broadcasting companies to further boost its subscriber growth.

Management expects the Canadian operations to generate some profit in the current quarter and continue to contribute favorably through the rest of the year.

We believe that content additions will not only improve Netflix’s competitive edge in international markets, but will also boost subscriber growth going forward.  In the recently concluded quarter, Netflix added 1.21 million net international subscribers and revenues from international operations increased 48.3% sequentially.

Additionally, Netflix’s future growth and strategy is entirely based on the online streaming business, as its DVD rental business continues to witness subscriber losses. Netflix faces significant competition from Shaw Communications and BCE Inc. in the Canadian market and from Amazon.com Inc. (AMZN), HBO and Verizon Communications (VZ) in the domestic market, which will remain a headwind going forward. Moreover, higher capital expenditure arising from international expansion will impact profits.

We have a Neutral recommendation on Netflix over the long term. Currently, Netflix has a Zacks #3 Rank, which implies a Hold rating in the short term.

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