Why Netflix Earnings Are So Great

17 Abril, 2018, 10:40 | Author: Enrique Watson
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Popular shows such as Stranger Things, House of Cards, and Black Mirror have enabled Netflix to keep attracting millions more subscribers each year while cultivating enough customer loyalty to be able to gradually raise its prices.

Netflix shares jumped 8% in after hours trading this morning in the USA after one of the key stocks on Wall Street reported higher than expected revenue and subscriber growth.

Shares of Netflix closed Monday at $307.78, with a consensus analyst price target of $286.62 and a 52-week range of $138.66 to $333.98. While none moved more than 1 percent, the gains marked a positive start to earnings seasons for a sector that's been under pressure in recent months.

New exhibits such as "Altered Carbon" & "O Mecanismo" assisted Netflix crush analysts' subscriber estimates, along with its better-than-expected second-quarter outlook voicing concerns regarding rivalry out of Apple Inc and Amazon.com Inc. Insiders have sold a total of 445,545 shares of company stock valued at $120,523,106 in the last quarter.

Netflix has once again kept the pedal to the metal on subscriber additions, bringing in 7.41 million net new subscribers, well ahead of its 6.35 million net adds forecast for the first quarter.

We'll have $7.5-$8 billion of content expense (on a P&L basis) in 2018 across a wide variety of formats (series, films, unscripted, docs, comedy specials, non-English language) to serve the diverse tastes of our growing global membership base. Traders accepted free income in exchange for the potential for growth in the future years, as it's enlarged to some 190 countries. Netflix now has 125 million paying customers, the most of any online TV network.

The company said it still expects to spend up to $US8 billion on content this year. Netflix will release about 700 original pieces of programming this year, including about 80 movies (more than any studio), more than one stand-up special a week and as many unscripted series as any USA cable network.

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For the just-ended quarter, revenue grew 40 percent year-over-year to $3.7 billion, the fastest pace in the company's history.

"Subscribers are accelerating even at higher pricing", BTIG analyst Richard Greenfield said. "Posts spend is having a direct effect on its own subscriber growth".

The company's market capitalization stands at $137.2 billion, more than double a year earlier.

To help cover its mounting costs, Netflix hiked prices by 10% in the final quarter of 2017, to $10.99 a month for the standard service.

The pricing upturn is one reason Netflix's first-quarter earnings climbed 63 percent from past year to $290 million, or 64 cents per share.

Overall, Netflix reported a profit of $290 million, or 64 cents a share, compared with $178 million, or 40 cents a share, a year earlier. It appears mostly bullish, as TipRanks analytics demonstrate NFLX as a Buy.

Netflix is poised to see its first quarter where revenues from streaming outside the USA surpasses its domestic market.

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