Netflix Added Nearly 7 Million Subscribers in Previous Quarter

Oct 17, 2018, 18:48
Netflix Added Nearly 7 Million Subscribers in Previous Quarter

Netflix is the first of the so-called Faang companies (Facebook, Apple, Amazon, Netflix and Google) to report this quarter.

The company hooked 7 million new streaming subscribers from July to September and for the current quarter, Netflix forecast it will add 1.8 million customers in the United States and 7.6 million in worldwide markets.

The subscriber stagnation revealed in July ran through Netflix stock like an aftershock and ended one of this year's longest and strongest rallies. Domestically, Netflix added 1.09 million subscribers, compared to an estimate of 673,800.

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Earnings jumped to 89 cents per share, well above a projected 68 cents. During that quarter, Netflix had a dearth of new programming that resonated with viewers the way hits like House of Cards and Stranger Things had done in the past. Analysts say that even if Netflix does reach its targeted 5 million new subscribers for Q3, Netflix investors can still expect more conservative growth moving forward.

"It was a surprisingly good quarter that caught a lot of the financial community off guard", said Jim Nail, a senior analyst at Forrester Research. Producing world-class content isn't cheap and Netflix is likely to see a cash burn increase from $2 billion last year to 3.3 billion this year.

Analysts from US financial group Keybanc downgraded their rating on Netflix to "sector weight" from "overweight", questioning whether the company was capable of improving investment returns and margins in years to come. And even USA growth supposedly remains strong, despite fears of a stagnating market. Netflix has parlayed subscriber growth into huge gains for investors. "That's a really good number for a market that's this mature". Interest expense so far this year has swelled to $291 million versus $238 million for all of 2018. Netflix has tripled in value over the past three years by posting record subscriber growth that consistently exceeds Wall Street forecasts. While most of that still funds shows licensed from other companies, original programs account for a growing share.

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The company announced earlier this month that it would build a new production facility in New Mexico as it ramps up original content efforts. The number of people paying for cable or satellite has fallen in recent years, denting profit at the world's largest media companies and triggering a wave of mergers.

Hastings, 58, suggested that he wasn't anxious about the competition.

At the same time it faces competition from the likes of Amazon and Disney.

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"My competitors have Netflix turning cash flow positive in two years, that's just insane - it's not going to happen", Wedbush technology analyst Michael Pachter said on Yahoo Finance's "Midday Movers' show".

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