Netflix shares jump 6 percent on strong subscriber growth

  • Netflix shares jump 6 percent on strong subscriber growth

Netflix shares jump 6 percent on strong subscriber growth

Exclusive television shows such as The Crown and Orange Is The New Black helped Netflix to attract significantly more new subscribers than expected in the third quarter, sending its shares soaring last night.

Netflix added 1.09 million subscribers in the US, and 5.87 million internationally, bringing the total number of subscribers to 137 million.

Earnings jumped to 89 cents per share, well above a projected 68 cents.

Shares rallied 14% on the news.

The July letdown sent Netflix stock plunging more than 10 percent, prompting some to speculate the company may have peaked.

Netflix's record-setting level of new programming paid off. It invests billions in original programming and uses those new TV shows and movies to lure subscribers.

Netflix ended September with 137 million worldwide subscribers, including 58.5 million in the U.S. In overseas markets, which now accounts for 57% of Netflix' total subscription base, Netflix saw 5.8 million net new subscribers, above the 4.5 million estimate.

But even at the time, analysts noted that the company tended to follow a pattern of second-quarter dips followed by third-quarter surges; indeed, in the third quarter in 2016, subscriber numbers rose after a second-quarter disappointment. The company anticipates adding another 9.4 million subscribers during the fourth quarter, up 13% compared with the 8.3 million it added a year ago.

Netflix said the investments were critical to the firm's growth.

The Q3 results for Netflix came as a breather for its investors and the team after facing a slow down in the last quarter.

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.

Wedbush analyst Michael Pachter was another skeptic, saying he was "mystified by the investor love affair with Netflix's India opportunity", pointing to price differences in Netflix's monthly plans versus cable TV in the country. It cut its projection of negative cash flow to closer to $3 billion. The total revenue has gone up to $4 Bn from $2.98 Bn a year earlier.

The company has already said it will boost spending in 2019, but investors could get a better sense of just how much the streaming service plans to lay out and whether it will need to borrow again.

"It'll probably still be the case that they're going to stick to raising debt twice a year", he said. In the third quarter past year, Netflix added 5.3 million subs.

Analysts estimate that it added about 676 hours of original programming in the United States in the most recent quarter, 135% more than in the same period a year earlier.