Netflix reels in $165bn with stock surge

Netflix is growing faster than even its most bullish fans on Wall Street predicted, blistering sales soothing doubts about its global prospects and sending its stock higher.

Netflix reels in $165bn with stock surge

By Lucas Shaw

Netflix is growing faster than even its most bullish fans on Wall Street predicted, blistering sales soothing doubts about its global prospects and sending its 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 28.9m customers this year, a record for the 21-year-old company.

The shares climbed 6% at one stage in the latest session, bringing its value close to $165bn (€142.5bn). 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 latest surge, the shares were up 80% 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, Reed Hastings, said. Netflix signed up 6.96m customers in the third quarter, boosting its global total to 137.1m.

Netflix shares typically fluctuate widely after earnings, and this quarter was no exception. At one stage, the stock soared to $405, putting the market value of the company in the same territory as Comcast, the largest US cable provider, and Walt Disney, the world’s largest entertainment company.

Goldman Sachs has a buy rating on the stock and raised its price target to $480, the highest among analysts. 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 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. Its 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.

Jason Bateman in Ozark
Jason Bateman in Ozark

Nor does the company release viewership figures. 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.

International territories remain the key to the company’s future, and accounted for 84% 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.

It was a surprisingly good quarter, that caught a lot of the financial community off-guard,” said Jim Nail, a senior analyst at Forrester Research.

“Even the US number was better than I thought it would be. That’s a really good number for a market that’s this mature,” he said. Netflix has spent nearly $7bn on programming through the first nine months of the year, and plans to boost its investment in the years to come.

While most of that still funds shows licensed from other companies, original programmes account for a growing share. Morgan Stanley said Netflix was likely to see further growth in 2019.

The company has “consistently reinvested its near-term success into deepening its competitive moat,” it said.

-Bloomberg

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