Netflix(NASDAQ:NFLX) stock has experienced a lot of volatility lately, falling by over 20% from its summer highs on the back of disappointing U.S growth in the third quarter and increased competitive pressure from players such as Amazon (NASDAQ:AMZN), Time Warner's (NYSE:TWX) HBO, and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) new YouTube Red service.

However, with long-term growth prospects unchanged, the short-term pullback looks like a buying opportunity for investors in Netflix stock.

Conquering the world
Netflix delivered disappointing user growth in the U.S. during the third quarter. Management was expecting 1.15 million new U.S. subscribers, but the company delivered only 0.88 million members in its home market. This represents a deceleration in growth versus 0.98 million additions in the same quarter last year.

According to management, this is at least partially related to the switch to chip-based credit and debit cards in the U.S. Many customers changed their card numbers when their cards were reissued, and this generated some problems for Netflix when trying to collect from those subscribers. Whether this was just a temporary problem due to involuntary payment-related churn or a more permanent slowdown remains to be seen, but it makes sense to expect growth to decelerate in the U.S. over the coming years as the business matures.

On the other hand, international markets are still firing on all cylinders, and Netflix gained 2.74 million new global members last quarter versus 2.04 million in the year-ago period. When considering both U.S. and international streaming subscribers, growth is also gaining speed, with 3.6 million additions last quarter versus 3 million for third quarter 2014.

The following charts show both streaming member count over the last several quarters and member additions in the last quarter versus the same period last year. When looking at the numbers in perspective, investors don't have much reason to worry about the company's performance.

Subs

Data source: SEC filings

Subs Gowth

Data source: SEC filings

It's important to keep in mind that Netflix is rapidly expanding its global presence: The company is entering Spain, Italy, and Portugal in the fourth quarter of 2015, and it will venture into South Korea, Hong-Kong, Taiwan, and Singapore in early 2016. 

International expansion is expensive, and it will probably take its toll on profit margins. However, everything indicates that Netflix is well on track to continue delivering sustained growth over the middle term.

A big fish in growing pond
Competition is rapidly increasing in online streaming, and investors need to keep a close eye on the competitive dynamics in the business. Especially since companies such as Amazon, Time Warner, and Alphabet are strong global players with deep pockets and valuable strategic resources.

Amazon offers over 40,000 titles through its Amazon Prime Video service, and the company is venturing into original programming with successful productions such as Transparent, which has won five Emmy Awards. Amazon's push into online video is about strengthening its competitive position in online retail. The company offers Prime Video in combination with several other benefits for Amazon Prime members for a $99 per year membership fee. Still, considering Amazon's competitive drive and its track record of success in different areas, it would not be a big surprise to see the company rapidly gaining traction in streaming over the years ahead.

Time Warner's HBO is home to many of the most popular series around, including blockbuster Game of Thrones. Time Warner has recently launched HBO Now as a direct steaming service, pricing the subscription at a premium to other alternatives in the market at $14.99 monthly. The company is also expanding into Latin America, offering HBO Go as a stand-alone online subscription service in the region, so Time Warner's HBO seems quite serious about its plans to join the streaming revolution on a global scale.

Adding to the competitive pressure, Alphabet is launching YouTube Red, a new subscription service that offers ad-free access to YouTube's video library, including music videos and offline downloads. YouTube Red also includes access to Google Play Music and the new YouTube gaming service for $9.99. While the service is just getting started, Alphabet is one of the strongest players in the online world, so the company is not a competitor to overlook.

Competitive pressure is clearly on the rise, but that doesn't mean Netflix will necessarily be hurt too much. Wall Street analysts and the financial media usually look at different industries as a zero-sum game in which the winner takes all, but that's not always the case in the business world. 

Just like linear TV has offered a lot of room for multiple companies to do well over time, there is no reason to believe Netflix, Amazon, Time Warner, Alphabet, and others can't successfully coexist with their own content and pricing strategies in the rapidly growing online streaming market.

Streaming services are still much cheaper than traditional pay TV, and as consumers around the world continue cutting the cord in the coming years, it should generate plenty of opportunities for different players to thrive over time. In any case, a growing library of highly demanded exclusive content provides a key source of competitive differentiation for Netflix, so increasing competition alone is hardly a well-grounded reason to sell Netflix stock.

Andrés Cardenal owns shares of Alphabet (A shares), Alphabet (C shares), Amazon.com, and Netflix. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and Netflix. The Motley Fool recommends Time Warner. Try any of our Foolish newsletter services free for 30 days.

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