The board of directors at Netflix, Inc. (NFLX - Analyst Report) recently approved a massive increase in its share authorization. The authorization has been expanded from 170 million to 5 billion including preferred stock, indicating a stock split over the near-term.

Following the share repurchase news, the shares rose 3.18% to $647.15 on Tuesday’s closing trade. Notably, Netflix was the top performer among the S&P 500 members, registering a 51% rise over the past year and a 96.5% in the last 6 months. [Wednesday continued the climb, closing at $671.10.]

It is expected that the stock split will make the Netflix more accessible to retail investors and pool in more capital over the long-term. Further, the company wants to attain greater flexibility in respect of issuing dividends, access to equity financing, option grants or enter acquisition deal.  

In addition, Netflix shareholders approved a non-binding agreement to elect board members annually. This new agreement will help increase investors’ rights to nominate directors.

Designed by New York City municipal pension funds, the arrangement would give shareholders with 3% or more interest in the company for three continuous years the right to nominate up to 25% of the board members. However, back in 2014, Netflix shareholder’s voted against such agreement citing concerns regarding corporate governance.

We believe that the increased shareholder confidence reflects the company’s strong financials and rising market valuation. In the last reported quarter, the video streaming company’s revenues rose 31.3% year over year to $1.4 billion. In addition, the company had cash and cash equivalents of $2.45 billion, up substantially from $1.11 billion in Dec 2014. Further, the company reported free cash outflow of $163 million.

We believe that the company’s international expansion plans are driving this growth.

In the first quarter, Netflix’s International revenues surged 55.4%, driven by its increased focus on global expansion. As its U.S. presence matures, Netflix is planning a rapid expansion abroad. Last September, the company expanded its services to six new European countries namely Germany, Austria, Switzerland, France, Belgium and Luxemborg.

Also, the company expanded to Cuba this February. In addition, Netflix is set to debut in Italy, Spain and Portugal by Oct 2015, further expanding its presence in the European continent. The ongoing expansion resulted in higher paid members in this international segment, up 64% year over year in the first quarter. 

In May, the company’s share prices surpassed the $600 mark following the news of its entry into the Chinese market. Notably, Netflix hit a new 52-week high of $613.25, gaining 4.5% on May 15, following a Bloomberg report on the company’s plans to expand its business to China (read more: Netflix Hits 52-Week High on China Expansion Rumors). On Jun 9, the stock hit another 52-week high of $649 followed as investors started speculating about a stock split.

Netflix has been expanding its geographical footprint beyond the U.S. for quite some time now. The company entered Canada in late 2010 and since has expanded its business to Latin America and Europe. Currently, Netflix is available in 50 countries, including 13 in Europe. Last year, Netflix expanded its services to six new European countries — Germany, Austria, Switzerland, France, Belgium and Luxembourg . In addition, the company is planning to expand into the Far East by establishing its foothold in China.

However, starting operations in a new country requires huge investments and considerable marketing, general and administrative expenses. Nevertheless, we believe that a fast-growing subscriber base will  drive  the top line and profitability. Additionally, price increases (for both domestic and international new users) will help Netflix to offset higher expenses in the near term.

Currently, Netflix has a Zacks Rank #3 (Hold). Some better-ranked companies in this sector are Blue Nile Inc. (NILE - Snapshot Report), Orbitz Worldwide, Inc. (OWW - Snapshot Report) and PetMed Express, Inc. (PETS - Analyst Report). All these stocks have a Zacks Rank #2 (Buy).