Netflix Blasts Past Subscriber Growth Expectations
Netflix shares jumped 8% in after hours trading this morning in the US after one of the key stocks on Wall Street reported higher than expected revenue and subscriber growth.
After the shares dipped 1% in the regular trading session ahead of the post close release of the earnings report, Netflix shares surged, peaking with an after hours gain of more than 8% before easing to end the electronic session up 5.98%. That took the gain so far this year to more than 68%.
Netflix is one of the so-called FAANG stocks - Facebook, Amazon, Apple, Netflix and Google (Alphabet). Its outperformance will hep change investor sentiment if repeated by other members of the group.
Netflix beat market estimates for subscriber numbers by around a million more than expected in the three months to the end of March.
The streaming video giant said it added 7.41 million net new global subscribers in the first quarter, up 50% from a year ago.
Netflix now said it has 125 million subscribers around the world, up from 117.6 million a year ago, with 56.7 million in the US where a stronger than expected 2 million or so were added in the quarter.
Total revenue jumped 43% over the from the first quarter of 2017, to $US3.7 billion which was “the fastest pace in the history of our streaming business, due to a 25% increase in average paid streaming memberships and a 14% rise in ASP,” or average subscription price.
Operating margins hit 12.1%, a high among recent quarters, and net income reached $US290 million, up 63% from a year ago as 2017’s price rise kicked in.
The company cited the timing of content spending for the higher-than-expected profits. That’s a hint that profit growth will be slower in coming quarters as the company spends money on new programming.
Netflix is poised to see its first quarter where revenues from streaming outside the US surpasses its domestic market. That continues the trend from the first quarter, where it added 5.5 million international subscribers, compared with 1.9 million in the US.
The company said it still expects to spend up to $US8 billion on content this year.
Looking to the current quarter Netflix expects to add another 6.2 million net subscribers and is looking at revenues of $US3.9 billion as the benefits of last year’s price rises flow through to the bottom line.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.