Netflix, Inc. Posts Spectacular Gains
Netflix, Inc. (NASDAQ:NFLX) has been in the news due to concerns about its “un-grandfathering” strategy, as well as threats from competitors like Hulu, LLC and Amazon.com, Inc. (NASDAQ:AMZN).
NFLX stock has lost about 13% year-to-date. However, it has posted impressive gains of around 43% over a five-year period, when the broader S&P 500 returned about 15%.
Netflix stock reported its third-quarter earnings on Monday, and the results were spectacular. Netflix added 0.4 million members in the United States, against its forecast of 0.3 million. Internationally, it added 3.2 million subscribers, against its forecast of 2.0 million. This would be a huge relief, as analysts’ main concern was the slow growth in subscriber numbers. The company believes that the strong growth was primarily due to excitement surrounding its original content. (Source: “Q316 Letter to shareholders,” Netflix, Inc., October 17, 2016.)
NFLX stock posted earnings of $0.12 per share—as compared to $0.07 last year—on revenue of $2.29 billion, which also beat consensus estimates. In a letter to shareholders, management has said that Netflix plans to release over 1,000 hours of premium original programming, up from over 600 hours this year. These numbers shall boost Netflix stock, which might again start its upward journey.
The video streaming giant has also issued upbeat guidance for its fourth quarter, as it expects net memberships of 5.2 million, with 1.45 million in the U.S. and 3.75 million new members internationally.
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Netflix stock had been losing ground this year, and the sentiment turned negative when the company had announced less-than-expected subscriber growth numbers in its last quarterly report. The subscriber number is the most important metric for the company, despite the fact that Netflix is doing great with its content strategy.
The company has made huge investments in original programming content and in expanding globally. The content budget of the company for 2017 is around $6.0 billion. Netflix has been signing deals to provide original and unique content to its subscribers. Its investments in providing local-language support are paying off as well. This means more upside for NFLX stock.
The only challenging market has been China, where the regulatory environment does not favor Netflix. However, the streaming company plans to license content to existing online service providers in China.
Investors will now be focusing on how Netflix handles its competitors in the domestic market and how well it can roll out local content in more international markets. However, at present, the impressive results shall buoy Netflix stock.