Netflix shares leap after subscriber surge

Markets Insider

Markets Insider

Back in July, Netflix reported lower-than-expected subscriber growth for the second quarter, and its shares into a tailspin that knocked 20 percent off their value in a month.

Netflix added almost seven million new customers in the three months to September, bringing its total to more than 137 million members worldwide.

Investors cheered the reassuring results released on Tuesday, lifting Netflix's stock by 12pc to $388 in extended trading. Most of the company's subscriber growth came from overseas, with worldwide users approaching 80 million.

Netflix reported earnings of 89 cents a share, topping analysts' consensus estimates of 68 cents a share. But eventually that will add up, and then this new competitive streaming market wouldn't be any cheaper or offer much more choice than old-school cable bundles do.

Better-than-expected growth in the third quarter will keep that narrative alive, while another miss will probably prompt a major sell-off.

That paid off in terms of new subscribers.

Netflix shares rallied 14% following Tuesday's closing bell after the streaming giant announced third-quarter earnings and subscriber growth blew past Wall Street expectations.

Hastings, speaking on the call about prospects for India, said: "We'll take it 1 million at a time and figure out how to expand the market as we grow". The company also forecast growth of 650 000 domestic subscribers and 4.35 million internationally.

Netflix anticipates that it will be able to meet this new European criteria when it arrives but as Hastings notes, the company would "prefer to focus" on making a great service that includes local content rather than being forced to create a specific amount of shows, documentaries or movies just to fill a quota.

"We feel like we have a long, long runway ahead of us in India", Greg Peters, chief product officer, said in a post-earnings video interview. The latest additions bring to 137.1 million Netflix's global subscription tally.

"We want to assure investors that we have the same high confidence in the underlying economics as our cash investments in the past", Netflix said in its letter.

The streaming company released a record 676 hours of original programming in the third quarter, according to Cowen & Co, the first time it has exceeded 500 hours in any quarter.

"Rising interest rates could make Netflix increasingly vulnerable to higher cost of capital", CFRA research analyst Tuna Amobi said.

Netflix will face stiff competition, with Walt Disney, the world's largest entertainment company, looking to launch its own on-demand services next year, as is AT&T, the parent of Warner Bros and HBO.

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