NETFLIX SOARS ...
By playing its cards right
Netflix Inc. soared to a record high after saying that its video-streaming service topped 62 million subscribers worldwide, as original shows such as House of Cards drew new viewers globally.
The stock jumped 18 per cent to $562.05 US at the close in New York, the biggest daily gain in almost two years, giving the Los Gatos, Calif.-based company a market value of $34 billion US — higher than that of CBS Corp.
U.S. subscribers jumped by 2.28 million in the first quarter, while international accounts rose 2.6 million, Netflix said Wednesday on its website. Both figures beat its Jan. 20 forecast. Sales grew 24 per cent to $1.57 billion, matching analysts’ projections.
Netflix is investing heavily in original programming to keep the U.S. business growing and support chief executive Reed Hastings’ international expansion. While new shows such as Unbreakable Kimmy Schmidt and Bloodline drove U.S. viewing, the rise of the U.S. dollar trimmed sales and contributed to losses overseas, the company said.
“Netflix remains a subscriber-growth momentum story,” Paul Sweeney, a Bloomberg Intelligence analyst, said in an email.
“As long as domestic and international subscribers continue to grow, bulls will have a reason to buy the stock.”
At its current level, Netflix has the sixth-highest price-earnings ratio in the Standard & Poor’s 500 index, according to data compiled by Bloomberg. It’s trading at about 144 times profit and is the top-performing stock this year in that benchmark, with a gain of 65 per cent.
Barton Crockett, an analyst with FBR & Co., recommended buying the stock Thursday and raised his one-year price target to $900 US from $400 previously. He cited a proprietary survey and estimated the company could almost triple its worldwide users.
“Netflix subscribers — nearly 40 per cent of TV households in the U.S. — love the service more than TV,” Crockett wrote in a note, citing an early April survey by ClearVoice Research LLC.
“In this outpouring of affection, we see Netflix as very likely to move toward 180 million global subscribers by 2020.”
First-quarter net income fell to $24 million US, or 38 cents a share, from $53.1 million US, or 86 cents, as the strong dollar contributed to losses outside the U.S. Excluding that, profit was 77 cents, the company
As long as domestic and international subscribers continue to grow, bulls will have a reason to buy the stock.
said. Analysts forecast profit of 63 cents, the average of 35 estimates compiled by Bloomberg.
Netflix has released a flurry of new series over the past few weeks, including the comic-book drama Daredevil from Walt Disney Co.’s Marvel. While Netflix doesn’t release viewer figures, the shows have been hits with subscribers.
“We think strong U.S. growth benefited from our ever-improving content, including the launch of the third season of House of Cards,” Hastings and chief financial officer David Wells wrote Wednesday in a letter to shareholders.
Hastings said Wednesday he expects to recommend the board split Netflix stock. The shares have more than quadrupled in the past three years.
The company plans to offer its service worldwide by the end of 2016.