Netflix shares jump 6 percent on strong subscriber growth

Mae Love
October 19, 2018

On Tuesday, Netflix reported third-quarter earnings of 89 cents per share versus the 68 cents FactSet Street estimate.

Netflix continues to face more competition from other streaming giants and traditional media companies as it keeps increasing subscription cost to augment its investments.

Separately, in a move that could be reflective of membership trends emerging from markets like India, Netflix said free trials in some markets do not yield more subscribers or higher revenue. The stock been volatile this year, starting at $200 and reaching a peak value of $423 in June, then going up and down for the rest of the year closing at $346 yesterday.

According to audit and consultancy firm PwC, India's video streaming market is growing at a compound annual growth rate (CAGR) of 22.6% and is expected to move into top ten video streaming markets by 2022 with revenues of Rs 5,595 crore. During the same period a year ago, the firm posted $0.15 earnings per share. For the record Netflix produced shows had over 112 Emmy nominations, and 23 wins (a tie with HBO for the most). The streaming service will also expand beyond English into Hindi and other Indic and Dravidian languages, CEO Reed Hastings added, in order to meet its long-term goal of 100 million subscribers in India.

India is already one of the biggest markets for YouTube, a chief competitor, and holds great potential for Netflix. "But even on the existing model, we feel like we have a long runway ahead of us in India".

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For the current quarter, Netflix forecast it will add 1.8 million customers in the United States and 7.6 million in worldwide markets.

"We recognise we are making huge cash investments in content, and we want to assure our investors that we have the same high confidence in the underlying economics as our cash investments in the past", it said in a letter to investors. Netflix's quarterly revenue was up 34.0% compared to the same quarter past year.

Netflix never identifies which shows are most successful.

It has been borrowing heavily to fund its rapid growth, issuing $7.5bn of bonds in less than three years - a strategy that could become more costly in a rising interest environment.

The company said they're still targeting operating margin to be at the lower end of the 10%-11% range for the full year 2018. It cut its projection of negative cash flow to closer to $3 billion. Streaming revenue surged 36%, reaching almost $4 billion in the quarter - a performance that matched Wall Street's forecasts of $4 billion. All of this came against the backdrop of a missed second quarter subscriber growth forecast, a dip in its share price and worries that its...

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