Netflix joined the $100 billion dollar club on Monday night.
Netflix gained far more customers than Wall Street expected during the holiday season, the company said on Monday, when it reported quarterly earnings that were in line with estimates.
Shares jumped more than 8 percent after hours, pushing the market capitalization of the company above $100 billion for the first time.
After adding 8.33 million subscribers in the fourth quarter — the highest ever — the company expects its winning streak to continue: First-quarter earnings guidance was well above estimates. Netflix is also burning less cash than Wall Street thought, as the international base became profitable.
- EPS: 41 cents vs. 41 cents per share expected by a Thomson Reuters consensus estimate
- Revenue: $3.29 billion vs. $3.28 billion expected by a Thomson Reuters consensus estimate
- Domestic streaming net adds: 1.98 million vs 1.29 million expected by a StreetAccount estimate
- International streaming net adds: 6.36 million vs. 5.10 million expected by a StreetAccount estimate
- Total net adds: 8.33 million vs. 6.39 million expected
- Free cash flow: -$524 million vs. -$742 million expected by a FactSet estimate
That’s compared with earnings of 15 cents per share in the year-ago period. In October, the company had said it expected earnings of 41 cents per share on revenue of $3.274 billion, adding 1.25 million U.S. streaming customers and 5.05 million internationally.
Netflix now said that it has more revenue from new members, it plans to spend $7.5 billion to $8 billion on content in 2018.
“We believe our big investments in content are paying off,” the shareholder letter said.
- EPS: 63 cents vs. 56 cents per share expected by a Thomson Reuters consensus estimate
- Revenue: $3.69 billion vs. $3.492 billion expected by a Thomson Reuters consensus estimate
- Domestic streaming net adds: 1.45 million vs. 1.27 million expected by a StreetAccount estimate
- International streaming net adds: 4.9 million vs. 3.74 million expected by a StreetAccount estimate
Netflix remains the dominant over-the-top video provider by many metrics. But Monday’s earnings report comes amid challenges for the company.
On one hand, prices are going up and some of the company’s content investments haven’t gone as planned. Netflix said in October that its $10 per month high-definition plan would rise to $11. Meanwhile, “Bright,” which the company touted as its “most ambitious film yet” in October, was panned by popular review sites.
Nonetheless, Netflix said, “Bright” has become one of the rmost viewed original titles ever, and will be followed by a sequel. The company said on Monday it had increased marketing spending on original content and was seeing some success.
At the same time, the prospect of more competition looms on the horizon. It’s been nearly 6 months since Disney said it planned to pull its movies from Netflix in favor of its own service. Since then, Disney also agreed to buy 21st Century Fox assets, a megadeal that would give the combined company a significant stake in Netflix’s rival, Hulu.
Not only that, but Apple, Facebook, Amazon and Google’s YouTube have double down on content.
But Netflix’s chief content officer Ted Sarandos has said he doesn’t want to get “too distracted by the competitive landscape,” and analysts admit the company has some advantages, noting the popularity of shows like “The Crown” and “Stranger Things.”
“The market for entertainment time is vast and can support many successful services. In addition, entertainment services are often complementary given their unique content offerings. We believe this is largely why both we and Hulu have been able to succeed and grow,” the company said.
Despite spending less than expected during the fourth quarter, Netflix said it expects negative free cash flow of $3 billion to $4 billion in 2018, and said it will continue to “raise capital in the high yield market.” However, the company leaned on its solid track record, noting that it does eventually expect to become free-cash-flow positive.
Netflix also reiterated its challenge to the repeal of net neutrality regulations by the FCC, even though the company is partnering with a growing number of internet service providers. Rodolphe Belmer, CEO of Eutelsat, a global satellite business, will also join the Netflix board of directors.
Netflix shares are up over 64 percent over the past year.
Source: Tech CNBC
Netflix jumps more than 8% after adding more subscribers than expected