Netflix stock hits new high
Subscriber growth trumps earnings miss for investors
Stock in Internet video-streaming giant Netflix Inc. soared late Wednesday despite a big earnings miss as investors focused on record subscriber additions in the U.S. and an aggressive international expansion.
Shares in Los Gatos, Calif.-based Netflix jumped more than12 per cent in extended trading to an all-time high of $534.07 (U.S.) after the company said it added 4.9 million subscribers globally versus its earlier forecast for four million additions.
That compares with a prior year gain of four million and brings Netflix’s worldwide streaming membership to 62.3 million.
The company cited strong growth across a number of markets including Canada, where independent research released this week estimates 900,000 adds in 2014 to bring Netflix Canada’s membership to 3.9 million.
Netflix founder and CEO Reed Hastings told analysts that viewership gains and retention have been driven by investment in a jampacked pipeline of original movies and TV shows, including the third season of House of Cards and new offerings such as the Unbreakable Kimmy Schmidt and Bloodline.
He also said there is room in the direct streaming market for traditional TV rivals such as HBO, CBS and Dish, which are all are launching consumer services.
“Netflix and HBO are not substitutes for one another given differing content,” Hastings said.
“We view offerings like the rumoured Apple offering, Sony’s PlayStation Vue and Dish’s Sling TV as more competitive to the current pay TV bundle than to Netflix which is lower cost, has exclusive and original content, and is not focused on live television.”
Along with robust global growth Netflix also reported better-than-expected U.S. additions of 2.3 million to push membership beyond the 40 million threshold.
Internationally, Netflix gained 2.6 million subscribers in the quarter to 20.88 million versus its forecast for 2.25 million additions. Netflix subscribers around the world streamed 10 billion hours in the first quarter, Hastings said.
The bullish subscriber numbers, however, overshadowed secondquarter revenue guidance below expectations and a profit hit in the first quarter from the strong U.S. dollar.
Netflix reported revenue in line with forecasts in the quarter at $1.57 billion, a 24-per-cent year-over-year gain, but income trailed the consensus expectation on foreign exchange losses and the impact of content and marketing spending.
Netflix earned $23.7 million, or 38 cents a share, compared with $53.1 million, or 86 cents, a year earlier, lagging the Street forecast for 69 cents.