Date
25 July 2017
Netflix added about 3.2 million subscribers internationally in the third quarter, higher than the 2.01 million average analyst estimate. Photo: Bloomberg
Netflix added about 3.2 million subscribers internationally in the third quarter, higher than the 2.01 million average analyst estimate. Photo: Bloomberg

Netflix stock surges 20% on subscription boom

Netflix Inc. saw its shares soar 20 percent after it added over 50 percent more subscribers than expected in the third quarter.

The video streaming company added about 3.20 million subscribers internationally in the third quarter, higher than the 2.01 million average analyst estimate, Reuters reports.

Its shares rose to US$119.82 in extended trade from a close of US$99.80, the news agency said.

Netflix, which has spent heavily to expand outside its home market, said that it was on track to start harvesting “material global profits” next year, even as it raised spending on original programming.

In the United States, Netflix added 370,000 subscriptions, compared with analysts’ estimate of 309,000, according to research firm FactSet StreetAccount.

“Investors appear laser focused on subscriber growth, and so long as Netflix delivers on that metric, investors will bid its shares up,” said Wedbush Securities analyst Michael Pachter.

However, Pachter said he thought the continuing cost of developing new shows would undermine plans to deliver material profits in 2017.

Netflix has expanded into more than 130 markets worldwide, including most major countries, except China.

It said on Monday it was dropping plans to launch a service in China in the near term, opting instead to license its shows for “modest” revenue.

It said it still hopes to launch service in China “eventually”.

Netflix has been facing a slowdown in subscription growth in the US as the market matures and a planned US price hike raised concerns it would not hit its targets.

It also faces competition from the likes of Hulu and Amazon.com Inc.

But the company, whose popular original shows include Stranger Things, Orange is the New Black and House of Cards, said it expects to add 1.45 million subscribers in the US in the current quarter.

Analysts on average were expecting 1.27 million additions, according to FactSet StreetAccount.

“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.

In its international markets, it expects subscriber additions of 3.75 million, compared with the average analyst estimate of 3.32 million.

Third-quarter revenue rose 31.7 percent to US$2.29 billion.

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CG

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