Netflix posted stronger than expected subscriber guidance in the third quarter as the company beat its own weak guidance by roughly 2 million subscribers.
Looking ahead to the fourth quarter, Netflix expects to add another 9.4 million subscribers-1.8 million in the USA and 7.6 million internationally. The four make up the so-called FANG group of high-growth companies that in recent months has lost some of its momentum following market-leading gains in recent years.
So when Netflix smashed its third-quarter subscriber growth target on Tuesday night, its shares leaped by 14 per cent. Netflix brought in seven million extra subscribers, a couple of million more than it had forecast in July.
Currently, Netflix is the most expensive streaming service in India, starting at Rs. 500 per month for a single screen and Rs. 650 per month for HD quality.
Revenue in the quarter increased 34 per cent year-on-year to almost $4 billion, while profits more than tripled to $403 million.
There's no greater sinking feeling than the moment you sit down to enjoy the finale of your favourite show - which you've been saving for the exact right time, when everyone's out and you've got a good brew on the go - only to find it's been REMOVED from Netflix or iPlayer, or whatever streaming service you use. Citigroup lowered their target price on Netflix and set a "neutral" rating for the company in a report on Monday.
The rise exceeded expectations for adding new subscribers during the third USA quarter. The company had previously projected $3 billion to minus $4 billion. "We also raise the incremental cost of debt based on rising interest rates, with Netflix still needing to raise an additional ~$5 [billion] of debt over the next two years before reaching positive free cash flow in 2021".
In the quarter, Netflix gained 5.9 million new subscribers overseas and 1.1 million in the US. Global markets accounted for 84 per cent of new customers, the company said, and constituted 57 per cent of its overall customer base.
"We've come a long way in the five years since launching original content on Netflix", the statement said. That's up 34 percent from the same period previous year. Worldwide streaming revenues jumped 49 per cent to $US1.97 billion, while domestic sales increased 25 per cent to $US1.94 billion. Earnings obliterated Wall Street predictions as well, coming in at 89 cents a share-21 cents above the estimate.
Netflix said it expects to book content expenses of up to $US8 billion this year.
"If all the "Netflix Killers" out there band together and take back their franchises, that would be a serious blow to Netflix", Csathy said.
The ratio for the companies in the S&P 500 is now 17.8 times the earnings they are expected to make this year, according to data from S&P.