Netflix smashes expectations, share price soars
After a depressing outing in the last earnings season, streaming video on demand (SVOD) market leader Netflix has hit a home run this time around. The company unloaded a barrage of exclusive high-quality content on subscribers, and in the process, it attracted millions more new people to its platform than anyone (including its own executives) expected. With a solid set of financial results across the board, Netflix’s share price rose by as much as 17% in after-hours trading.
Netflix is one of the market’s best-performing stocks so far this year
SOURCE: Yahoo Finance
Netflix said its content strategy paid off over the last quarter. The company added 6.96 million people to its platform over the three-month period, bringing its global total of subscribers to 137.1 million. That’s an overshoot of 2 million on the company’s own forecast for the quarter. It’s also the metric that investors were most interested to see outperform, after the company missed estimates in July.
Netflix spends billions of dollars every quarter on original and exclusive content in an attempt to attract these customers. Over the last quarter, it pushed this strategy to the extreme, releasing a record 676 hours of original programming. This isn’t a small jump, either: the company has never exceeded 500 hours of original content in a quarter before.
It paid off. Netflix said that sales rose by 34% to $4 billion, matching analysts’ estimates, while earnings per share increased more-than threefold to 89 cents – a massive beat against the Street’s expectations of 68 cents. Looking to the future, the company said it expects to add 9.4 million new subscribers globally – far more than the 7.18 million that analysts are looking for.
On an earnings call, the company’s CEO, Reed Hastings, described Netflix’s strategy going forward, and why he feels it’s important that the company focusses primarily on itself, rather than its competitors:
“You know, there are so many competitors, of course Disney’s going to enter, AT&T’s going to expand HBO, YouTube is just on fire growing around the world, video gaming like Fortnite – I mean there’s so many ways to have great entertainment on the screen. So we don’t focus that much on any one, because no one seems to affect us that much. What affects us is can we produce the best content the world’s ever seen, can we get people excited about that content, can we serve it up in ways that make it really fun and easy, again focussing on our fundamentals. And, you know, some day there will have to be competition for wallet share, we’re not naïve about that, but it seems very far off from everything we’ve seen.”
Dominion holds Netflix in its Global Trends Ecommerce Fund.
If you would you like to receive the Newsfeeds daily, please click here to sign up now!Help us make this Newsfeed better by rating this article. 1 star = Poor and 5 stars = Excellent
- Click here to print this story: Print
The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.