Netflix share surge a smash hit with investors
Netflix surged in late trading after a blow-out quarter, vaulting past US$100 billion in market value for the first time to put the video service on a lofty perch with the likes of Goldman Sachs Group and Qualcomm.
The world’s largest online TV network yesterday reported its strongest year of subscriber growth to date. Netflix added 24 million customers in 2017, bringing its global total to 117.6 million. For the final three months of the year, the Los Gatos, California-based company crushed Wall Street estimates and suggested it will continue to do so in 2018.
While rival media companies merge, fire staff and fret about the future of their businesses, Netflix keeps chugging along, adding customers at home, in Europe and Latin America. Fourth-quarter sales grew by a third to US$3.29b, the company said, while earnings almost tripled from a year prior to US41c a share, meeting estimates.
Netflix will plough all of that and more into new TV shows and movies. The company has said it will spend as much as US$8b on programming this year, and disclosed yesterday it will shell out another US$2b for marketing. Netflix is also dramatically increasing its nonEnglish programming, with plans to release 30 local language productions in 2018.
The shares rose 8.3 per cent to US$246.55 in late trading. If those prices hold, it’ll be a new high for the stock, which had gained 19 per cent this year.
Netflix signed up 8.33 million customers in the fourth quarter, surpassing analysts’ estimates of 6.34 million, thanks in large part to the popularity of the fantasy series Stranger Things and the new Will Smith movie Bright.
That success has inspired Facebook, Apple and Amazon to try their hand at original programming. It has also spurred rivals like Walt Disney to invest more in online services and acquire competitors. Yet Netflix enjoys a head start on all those players.
International territories accounted for the bulk of the subscriber growth and hold the key to Netflix’s future, with additions of 6.36 million topping the 5.05m average of analysts’ estimates. Netflix said Rodolphe Belmer, the chief executive of Paris-based Eutelsat Communications, will join its board.
The US business, where growth had been slowing, also showed vigour. The company signed up 1.98 million new customers at home, up from a year ago and beating analysts’ projections of 1.29 million, according to Bloomberg data.
Netflix churns out a wide range of new shows every month to entice new viewers and keep old ones. In the latest quarter it also released “The Crown,” the first season of David Fincher’s “Mindhunter” and its first original German series, “Dark.”
“In only five years since launching our first original series, Netflix had three of the top five most searched TV shows globally for the second year in a row,” the company said in its letter to shareholders.
Netflix expects to will add 6.35 million customers in the first quarter, more than the average 5.18 million projection of analysts. That includes 1.45 million new subscribers in the U.S.
The company’s October price increase — US$1 a month for the most popular plan — had little impact, if any, on growth in the quarter.
— Bloomberg