NEW YORK (TheStreet) -- Netflix's (NFLX) opportunity to expand into Europe is big, as the company moves its services into Germany, Austria, Switzerland, France, Belgium and Luxembourg. The sheer scale of the opportunity, however, may surprise everyone, including Netflix.
Cantor Fitzgerald analyst Youssef Squali believes that Netflix could add as many as 24 million additional subscribers to its already burgeoning empire, which has 48 million subscribers, at a much faster rate than anyone believed, given management's public comments. "This move goes well beyond initial expectations of Germany, France, or maybe both, and adds ~62M European broadband households (BB HHs) to the company's TAM, by our estimate," Squali wrote in the note. "Assuming ~30% penetration (vs. US at ~40%), these countries could contribute ~24M additional subscribers over time." Squali rates Netflix "buy" with a $425 price target.
In the press release on Wednesday that outlined its expansion plans, Netflix didn't disclose pricing, programming and supported devices, noting that the information "will be available at a later date."
Most of the additional 62 million households are in Germany and France, two of the largest economies in Europe. Germany has approximately 28.3 million broadband households, while 24.2 million broadband households are in France. These two countries are where Netflix will face its largest competition, as Amazon's (AMZN) Lovefilm is already entrenched in Germany, and France has tough regulatory rules.
Squali estimates there are 3.8 million broadband households in Belgium, 3.5 million in Switzerland, 2.2 million in Austria, and around 175,000 in Luxembourg, giving Netflix the opportunity to expand its international presence.