Netflix soars as blistering subscriber growth restores faith

Bloomberg

Netflix Inc is growing faster than even its most bullish fans on Wall Street predicted, soothing doubts about its global prospects and sending its already-stratospheric stock higher.
After a stumble with its previous results, the world’s largest paid online TV network added far more subscribers than analysts expected in the third quarter. Netflix also issued an upbeat outlook for the current three months, saying it plans to add 28.9 million customers in total this year, a new record for the 21-year-old company.
The results should prolong Netflix’s reign as one of the best-performing stocks on Wall Street, giving the company leeway to spend billions of dollars more on original programming. Netflix has parlayed subscriber growth into huge gains for investors. Even before the after-hours surge, the shares were up 80 percent this year.
“There is so much growth ahead in streaming video entertainment, we’re going to focus on that for a very long time,” Chief Executive Officer Reed Hastings said during a pretaped interview with analysts. Netflix signed up 6.96 million customers in the third quarter, boosting its global total to 137.1 million. That sent the shares up as much as 17 percent in extended trading.

PROGRAMMING FLOOD
Netflix doesn’t hide its formula for success. It invests billions in original programming and uses those new TV shows and movies to lure subscribers. The Los Gatos, California-based streaming company released a record 676 hours of original programming in the third quarter, according to Cowen & Co. That marked the first time it has exceeded 500 hours in any quarter.
The slate included new seasons of the drama “Ozark” and the animated comedy “BoJack Horseman,” as well as new series “Insatiable” and “Maniac.”
Netflix never identifies which shows are most successful. Nor does the company release viewership figures for programs, contending that its subscriber growth demonstrates the popularity of its entertainment slate.
Yet the company did acknowledge one point of strength: India, where it just released its first original series, “Sacred Games” and “Ghoul.” Those shows made Netflix “feel more local, more relevant” to local consumers, Chief Content Officer Ted Sarandos said during the call.
India is already one of the biggest markets for YouTube, a chief competitor, and holds great potential for Netflix. It is the world’s second-most-populous country, and hundreds of millions of residents now have access to the internet.

OVERSEAS EXPANSION
International territories remain the key to the company’s future, and accounted for 84 percent of Netflix’s new customers in the third quarter. Netflix doesn’t break out its users by market, with the exception of the US, though most analysts agree that the UK, Brazil, Canada and Mexico rank among the company’s largest. Hastings, speaking on the call about prospects for India, said: “We’ll take it 1 million at a time and figure out how to expand the market as we grow.”
In the US, where Netflix can already claim almost half of households as users, the company expects to add 1.8 million new customers this quarter, bringing the domestic total to 60.3 million. The additions helped lift profit more than threefold to 89 cents a share, beating the 68-cent average of analysts’ estimates.