Netflix posts huge gains as subscriber growth soars

Sergio Cunningham
October 18, 2018

Why it matters: It's impressive to see Netflix's growth from a DVD-by-mail outlet to the industry's leading video streaming outfit, complete with compelling original content production.

"Rising interest rates could make Netflix increasingly vulnerable to higher cost of capital", CFRA research analyst Tuna Amobi said.

Yesterday we learned that in the United States, Netflix added 1.09 million new subscribers and 3.91 million internationally.

Netflix shares surged more than 10 percent in after-hours trading Tuesday after the streaming giant easily topped expectations for quarterly earnings and subscriber growth.

New customers were lured in by returning seasons of "Orange is the New Black" and "Marvel's Luke Cage", as well as new shows such as "Ozark" and "Maniac", the limited series starring Emma Stone and Jonah Hill, Netflix said. In the third quarter a year ago, Netflix added 5.3 million subs. Said eMarketer media analyst Paul Verna. That is likely just the start of Netflix spending as they recently agreed to buy a movie studio to help Netflix expand their original programming.

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Netflix is forecasting paid net additions of 7.6 million for Q4 and total net additions of 9.4 million.

India has also turned out to be a lucrative content hub for Netflix which plans to spend more than $8 billion on original programming this year.

Netflix is the first of the so-called Faang companies (Facebook, Apple, Amazon, Netflix and Google) to report this quarter. "The variance relative to forecast was due to greater-than-expected acquisition globally, with strong growth broadly across all our markets including Asia". Netflix doesn't break out its users by market, with the exception of the USA, though most analysts agree that the UK, Brazil, Canada and Mexico rank among the company's largest. Analysts were expecting 7.7 million - 1.6 million in the USA and 6.1 million internationally, according to Instinet.

At the same time, Netflix faces competition from deep-pocketed companies such as Amazon and new streaming services from Walt Disney Co and AT&T Inc that are expected late next year. Its biggest global competitor, Amazon, has taken a much different route, pricing its Prime subscription at Rs. 129 per month or Rs. 999 per year.

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