Netflix Adds Seven Million New Customers

Kenny Grant
October 20, 2018

It added 7 million subscribers in the period, a larger amount than it added in the third quarter of past year. Still, Netflix is one of the top performers in the S&P 500 this year with a gain of 80 percent. This mantra guides Wall Street's assessment of Netflix, the world's largest video streaming company, whenever it publishes its latest tally of subscribers.

Netflix signed up 6.96 million customers in the third quarter, boosting its global total to 137.1 million.

Netflix reported earnings of 89 cents a share, topping analysts' consensus estimates of 68 cents a share.

Shares of the company were up 10 percent at $381.21 before the bell. Revenue expanded 2.4 percent, to $4 billion.

One analyst asked Hastings on Tuesday how much will Netflix have to tweak the model to achieve success. Do you have a TV subscription?

The stronger than expected growth - a record for the third quarter - sent shares up 11% in after-hours trading.

New customers were lured in by returning seasons of "Orange is the New Black" and "Marvel's Luke Cage", as well as new shows such as "Ozark" and "Maniac", the limited series starring Emma Stone and Jonah Hill, Netflix said.

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Netflix is the most costly of the five important technology companies. In a letter to shareholders Tuesday, Netflix said it believes paid subscribers now are a more stable indicator of how well the service is doing. This appears to be part of the general optimizing growth strategy to exploit the tailwinds in the current market. In the third quarter previous year, Netflix posted $2.99 billion in sales.

"We're super encouraged with India and the growth that we've got early on, but we know it's going to be somewhat of a tough market". Sales grew 34 per cent to US$4 billion, meeting Wall Street forecasts. Even so, the forecast calls for 1.1 million more subscribers than Netflix gained in the same period a year ago. "Rising interest rates could make Netflix increasingly vulnerable to higher cost of capital", CFRA research analyst Tuna Amobi said. "Even the US number was better than I thought it would be".

With an increased number of people watching Netflix may assist in kick starting some animal spirits in the stock market. While the company reports a net profit, it spends more than it takes in and borrows frequently to finance its programming budget. Following the sale, the chief financial officer now owns 1,000 shares of the company's stock, valued at approximately $359,000. Netflix had 32 analyst reports since May 15, 2018 according to SRatingsIntel. Each is a major studio that pushes out dozens of new programs a year.

Netflix is not looking to diversify to other areas for now, and is unlikely to feel compelled to for years to come, Reed told the post-earnings interview.

Hastings, 58, suggested that he wasn't anxious about the competition.

"We'll go from expanding from English to Hindi to many more languages to more pricing options, more bundling, all of those things are possible", he said. "The game is on".

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