Media Moves

Coverage: Netflix rises after it gains more users than expected

April 17, 2018

Posted by Chris Roush

NetflixNetflix Inc.’s blitz of original programs attracted a surprisingly high 7.4 million new customers from January to March, reassuring investors who are betting the video streaming pioneer’s massive spending will fuel growth around the world.

Lisa Richwine and Laharee Chatterjee of Reuters had the news:

New shows like “Altered Carbon” and “O Mecanismo” helped Netflix smash analysts’ subscriber estimates, and its better-than-expected second-quarter outlook soothed fears about competition from Apple Inc and Amazon.com Inc.

Shares of Netflix jumped more than 7 percent in after-hours trading on Monday to $330.30. The stock is the top performer on the S&P 500 this year, gaining more than 60 percent.

“I don’t think this is a one-time thing,” said Chaim Siegel, analyst at Elazar Advisors, “It’s very similar to the results we saw last quarter. It’s getting better.”

Wall Street expected Netflix to add 6.5 million new subscribers, according to FactSet data. Netflix topped that and also said it would bring in 6.2 million more customers from April through June, one million more than analyst predictions.

Netflix says it will spend up to $8 billion on global TV shows and movies in 2018. As it has expanded to some 190 countries, investors accepted negative free cash flow in exchange for the potential of outsized growth in future years.

Seth Fiegerman of CNNMoney.com reported that most of the growth came internationally:

On a conference call with analysts, Netflix executives admitted to being surprised by the company’s current level of success.

“We’ve outperformed the business in a way we didn’t predict,” David Wells, Netflix’s CFO, said on a conference call with analysts Monday. “The business has grown faster than we expected.”

Much of that growth is now coming from overseas. The vast majority of the new subscribers last quarter, nearly 5.5 million, came from outside the United States as Netflix continues to gain ground in international markets.

During the first quarter of this year, Netflix launched 18 original series, 11 new seasons for existing original series, and 14 new original movies, according to Michael Pachter, an analyst with Wedbush.

Todd Spangler of Variety reported that the company’s stock rose 6 percent in after-hours trading:

On the results, Netflix shares jumped more than 6% in after-hours trading Monday. The stock had closed down 1.2% for the day in regular trading, to $307.78 per share.

Wall Street analysts had expected Netflix to report U.S. net adds of 1.48 million subs and 4.84 million international subs (in line with the company’s previous guidance) and had pegged Q1 revenue at $3.89 billion and earnings per share of 64 cents.

Despite falling short on the top line relative to analyst expectations, Netflix noted in its letter to investors that quarterly revenue grew 43% year over year in Q1, “the fastest pace in the history of our streaming business.” That was due to a 25% increase in average paid streaming memberships plus a 14% rise in the average subscription price, coming after Netflix raised rates on its plans in the U.S. and other territories in Q4 of 2017.

For Q2, Netflix said it expects 6.2 million global net additions (1.2 million in the U.S. and 5.0 million for the international segment) — up from 5.2 million in the year-earlier quarter, and higher than Wall Street analysts expected for Q2.

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