Netflix shares surge on positive subscriber news

Brunilde Fioravanti
Ottobre 17, 2018

Netflix shares soared 15% after reporting its Q3FY2019 earnings and recording 130 million paid subscribers and 7 million on free trial.

The leap in subscribers marked a sharp turnaround from three months ago, when investors sent Netflix shares tumbling 14 percent after it missed Wall Street's subscriber growth targets. Said eMarketer media analyst Paul Verna.

The company's net income rose to $402.8 Mn in the third quarter ended on September 30, up from $129.6 Mn in the same quarter, a year earlier.

"After handily blowing away Street expectations on subs in the last few years, this is a clear speed bump for Netflix as the global miss was most concerning, given this is the linchpin to the core growth thesis for the coming years", GBH Insights technology analyst Daniel Ives said at the time, suggesting a "speed bump" rather than the start of a negative trend.

Over the quarter Netflix launched new seasons of Orange is the New Black, Ozark, Marvel's Luke Cage and Bojack Horseman. Wall Street analysts had expected Netflix to add about 5.2 million streaming customers in the quarter. Only about 1 million of the almost 7 million new subscribers came from the United States.

Growth in both the USA and worldwide were slower than management had been expecting. In all, Netflix added nearly 2 million more subscribers than the 5.09 Wall Street expected. Nor does the company release viewership figures for programs, contending that its subscriber growth demonstrates the popularity of its entertainment slate. Diluted earnings per share checked in a $0.89 per share versus $0.29 per share during the same time in 2017. It added 6.96 million new subscribers, exceeding expectations and coming in particular relief after the company disappointed during its previous quarter. "However, given Netflix's longtime leadership and extensive content library, competitors will be hard-pressed to build streaming businesses that can aspire to become market leaders". Producing world-class content isn't cheap and Netflix is likely to see a cash burn increase from $2 billion last year to 3.3 billion this year.

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. The company released 676 hours of new TV shows, movies and specials in the latest quarter, helping attract new customers.

"We've come a long way in the five years since launching original content on Netflix", the statement said.

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