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Netflix original shows lure more new subscribers than expected

April 16, 2018 8:26 PM
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Netflix Inc.'s blitz of new programming attracted a surprisingly high 7.4 million new customers from January to March, reassuring investors who are betting the video streaming pioneer's massive spending will fuel growth around the world.

Shares of Netflix jumped more than seven per cent in after-hours trading on Monday to $330.30 US. They are up 65 per cent this year.

Wall Street expected Netflix to add 6.5 million new subscribers, according to FactSet data. Netflix topped that and also said it would bring in 6.2 million more customers from April through June, one million more than analyst predictions.

Netflix is spending up to $8 billion US on global TV shows and movies in 2018. As it has expanded to some 190 countries, investors accepted negative free cash flow in exchange for the potential of outsized growth in future years.

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

Also read: Netflix subscriber growth faces new test after $46-billion rally

But it faces growing competition as technology companies such as Apple Inc and Amazon.com Inc pour money into premium programming, international rivals jump into streaming, and traditional media companies pursue digital customers.

Walt Disney Co. will stop supplying new movies to Netflix starting next year and will start its own streaming service for families.

During the quarter ended in March, Netflix boosted original programming on its monthly subscription service by 85 per cent from a year earlier to a record 483 hours, according to Cowen & Co. analysts.

The slate included science fiction series Altered Carbon and Marvel action drama Jessica Jones.

Netflix has signed up more than half of all U.S. broadband households and is building its customer base globally. At the end of March, its customer ranks had swelled to 125 million.

Investors have appeared bullish on the company's ability to add more members. Netflix recently traded at 93 times expected earnings for the next 12 months, versus Amazon at 133 times earnings and Disney at 17 times earnings, according to Thomson Reuters data.

Net income rose to $290.1 million US, or 64 cents per share, in the quarter ended March 31 from $178.2 million US, or 40 cents per share, a year earlier.

Revenue grew 40 per cent year-over-year to $3.7 billion US, the fastest pace in the company's history, thanks to the increase in new subscribers and a 14 per cent rise in the average cost of a Netflix membership.

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Source: cbc.ca

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