Netflix shares skyrocket 9.7%
Video provider has grown 78% in last year
Netflix shares soared after the streaming- video provider scored a record second quarter, surpassing forecasts for subscriber growth and boosting its international audience past the domestic total for the first time.
Investors continue to forgive minuscule profit for growth in subscribers, which soared to almost 104 million in the period. The company’s stock price jumped as much as 9.7 per cent to US$ 177 Tuesday in New York, its biggest increase since October. Netflix shares have risen 78 per cent in the past year.
The company’s secondquarter results, released Monday after the market closed, revealed how the streaming video giant has begun to reshape the TV business overseas just as it has at home.
Netflix’s blend of TV shows, movies and standup comedy has started to catch on in some of the biggest countries in the world, from Brazil to the U. K. The company will be in at least 20 per cent of broadband households in five of i ts largest markets outside the U.S. by the end of the year, according to Instinet.
“All throughout the West, in Latin America, North America and Europe, we’re doing very well,” chief executive Reed Hastings said on a webcast. “We just need to continue to do what we’re doing.”
The streaming- video provider signed up 5.2 million subscribers in the second quarter, two million more than analysts had forecast. The company said 4.14 million of those new viewers came from outside the U.S ., bringing the international total to more than 52 mill i on. International operations will be profitable for the first time this year, Netflix said.
The company will spend more than $6 billion on programming in 2017 to offer that global audience a little bit of everything. While most of the budget reflects shows l i censed from big Hollywood studios, the company is releasing a dizzying array of new shows and movies of its own, including new series set in Spain, South Korea and Mexico during the quarter.
All that growth comes at a cost. Net income of US$66 million, or 15 cents a share, fell short of the 16-cent average of analysts’ forecasts, even while up substantially from a year earlier. Operating margin shrank to 4.6 per cent in the quarter, which the company attributed to higher content costs. Netflix raised US$ 1 billion in the quarter to fund original programming, and said it won’t be cash flow positive for years to come.
But investors won’t care so long as the subscriber growth continues. The company projects it will add 4.4 million new subscribers in the current third quarter, compared with the 3.96 million average of analysts’ estimates.
Netflix forecasts net income of 32 cents a share, on revenue of US$ 2.97 billion. That compares with analysts’ estimates of 23 cents and revenue of US$ 2.88 billion.
For the second quarter, Los Gatos, Calif.- based Netflix signed up 1.07 million U. S. customers, easily beating the 633,000 average of analysts’ estimates compiled by Bloomberg. Total sales grew to US$ 2.79 billion, compared with projections of US$2.76 billion.
Having already surpassed 50 million customers in the U. S., Netflix has fixated on adding customers abroad, especially in Latin America and Europe. The company recently opened a customer- service centre i n Amsterdam that will employ at least 400 people by next year.