Netflix shares head for
new high after strong subscriber outlook
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[April 18, 2017]
By Lisa Richwine and Narottam Medhora
Inc made a bullish forecast for subscriber additions by mid-year, a
positive sign for its push to expand around the world that sent its
shares toward an all-time high.
The streaming video company pushed back the next season of its smash-hit
"House of Cards," and other programing to the second quarter, meaning it
lured in fewer new subscribers in the first quarter than expected, but
will likely make it up from April through June.
Subscriber rolls, the most closely watched measure of Netflix's growth,
rose by just under 5 million globally in the first quarter, behind
analysts' projection of 5.18 million, according to FactSet StreetAccount.
However, Netflix forecast 3.2 million more in the seasonally slow second
quarter, well ahead of analysts' estimate of nearly 2.4 million.
Its shares dropped as much as 3 percent in after-hours trading before
rebounding to gain 1.3 percent. The late rise put Netflix stock on track
to open at a record high on Tuesday.
A decade after shaking up Hollywood by delivering TV shows and movies
over the internet, the company said it expects to top 100 million global
subscribers this weekend.
Netflix has expanded around the world over the last few years, betting
that its U.S. formula would pay off in other countries. Opening in new
markets and creating shows in additional languages was an expensive
Chief Executive Reed Hastings urged investors to look at its growth over
time rather than quarter-by-quarter fluctuations.
"We definitely see a big opportunity around the world," Hastings said in
an interview with analysts that was posted on YouTube.
In its quarterly letter to shareholders, Netflix asked investors to
judge its future success by looking primarily at revenue growth and
global operating margins.
That would be a shift for Wall Street, which has focused on subscriber
numbers, said Needham & Co analyst Laura Martin.
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The Netflix sign on is shown on an iPad in Encinitas, California,
April 19,2013. REUTERS/Mike Blake/File Photo
"The minute you actually pivot (investors) to an income statement,
you're talking to a completely different kind of investor," Martin said.
"And that investor demands profitability. So it's a risky business."
The Los Gatos, California-based company said net income rose to $178
million, or 40 cents per share, compared with $28 million, or 6 cents
per share, in the year-ago period. Wall Street had expected 37 cents per
Revenue rose 35 percent to $2.64 billion in the quarter.
The earnings beat was due to the change in timing of "House of Cards,"
which helped push costs into the second quarter, boosting operating
margins from January through March and reducing them in the second
For the quarter that ended March 31, Netflix added 3.53 million
subscribers outside the United States. (http://bit.ly/2puJ1Yt) Analysts
on average had estimated 3.68 million additions, according to research
In the United States, the company added 1.42 million subscribers,
compared with analysts' average estimate of 1.50 million.
Up to Monday's close, Netflix's stock had risen nearly 19 percent in
2017, outperforming the roughly 5 percent gain in the broader S&P 500
(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D'Souza,
Peter Henderson and Bill Rigby)
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