Netflix shares soar as it announces 6.96m new members

17 October, 2018, 18:45 | Author: Elaine Woods
  • Netflix Posts 207% Earnings Growth CSX Beats

Shares rallied 14% on the news.

"It was a surprisingly good quarter that caught a lot of the financial community off guard", said Jim Nail, a senior analyst at Forrester Research. "The answer: an aberration, likely the results of a somewhat low volume of new content last quarter".

Netflix revenue in the quarter increased 34% year-on-year to almost $4bn, while profits more than tripled to $403m.

The Netflix executive highlighted the streaming service's varied content palate, with the addition of new animated adult comedies - Disenchantment, from Matt Groening, creator of The Simpsons and Futurama, and Paradise PD, from the makers of Brickleberry, to complement Big Mouth, Bojack Horseman and F is for Family - and its popular romantic comedies, including To All the Boys I've Loved Before, one of the service's most-viewed original films with strong repeat viewing.

New customers were lured in by returning seasons of "Orange is the New Black" and "Marvel's Luke Cage", as well as new shows such as "Ozark" and "Maniac", the limited series starring Emma Stone and Jonah Hill, Netflix said.

While investors focus on subscriber growth, Netflix has been trying to get them to pay more attention to another metric - average subscription prices. The company also added 6.96 million new subscribers, handily beating analysts' expectations.

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Better-than-expected growth in the third quarter will keep that narrative alive, while another miss will probably prompt a major sell-off. Analysts were expecting 7.7 million - 1.6 million in the United States and 6.1 million internationally, according to Instinet. In overseas markets, which now accounts for 57% of Netflix' total subscription base, Netflix saw 5.8 million net new subscribers, above the 4.5 million estimate. "Quotas, regardless of market size, can negatively impact both the customer experience and creativity", Hastings said.

Earnings per share: $0.89. Netflix added 5.15 million subscribers in the second quarter of 2018, missing management's original forecast for 6.2 million.

Netflix expects to burn through more than $3 billion in cash this year and in 2019.

It has been borrowing heavily to fund its rapid growth, issuing $7.5bn of bonds in less than three years - a strategy that could become more costly in a rising interest environment. But the recent tech selloffs left and right have done nothing to boost investor confidence and Netflix stock could be set to take another hit.

At the same time, Netflix faces competition from deep-pocketed companies such as Amazon and new streaming services from Walt Disney Co and AT&T Inc that are expected late next year.

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