Netflix shares soar on huge growth in subscriber additions
- by Enrique Stewart
- in Technology
- — Oct 18, 2016
Netflix stock soared as much as 20% in after hours trading Monday on the news.
"Netflix has successfully navigated the challenges of a price increase", retail research group Conlumino said in a note, adding that it had been "somewhat less successful" in maintaining subscriber growth.
The company's shares were soaring 19 percent higher Monday, after the streaming video service reported skyrocketing profit and membership numbers that brushed away worries its subscriber growth, nearly always the main way people take Netflix's pulse, might go off a cliff.
Internationally, the company's user growth was even better.
Netflix stock has been in a tug of war lately between bulls and bears over whether the company can continue to add new subscribers at a brisk pace or has hit a wall.
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The three months ended September 30 were the eighth quarter out of the last 10 in which Netflix signed up fewer net new streaming USA subscribers than it did in the same quarter a year earlier. Netflix had expected to add 300,000 net US subscribers and about 2.3 million globally. It is now available in almost every country except China. Optimists about Netflix's plans to become the first global TV network say it absolutely is. Even better, the company said it expects Q4 U.S. user growth to surge to 1.45 million, versus expectations of just 1 million.
From a financial perspective, net income rose to $52 million, or 12 cents a share, from $29 million or 7 cents a share a year ago, exceeding analysts' forecasts. Netflix said its U.S.net subscriber additions in Q3 were 0.370 million, higher than its own 0.30 million guidance. Getting anywhere close to that level outside the USA would bring huge profits raining on Netflix.
But Canada, Finland and the United Kingdom - where Netflix arrived before 2014 - may not have the same dynamics as Indonesia, Spain, India and other countries with huge populations but an untested willingness to pay for Netflix.
According to CNBC, Netflix is going for more in Q4. And Monday's healthy subscriber growth erased some of the fresh doubts about a Netflix subscriber growth black hole.
However, Netflix has attempted to reinvigorate overall growth with an ambitious global expansion at the beginning of this year. Yet a shiny coat of paint can't hide the structural damage in the house of Netflix.
