Those of you carrying out online stock trading would have noticed that streaming content provider Netflix ($NFLX) is doing really well now. It’s something investors will be observing closely.
Netflix has reported significant gains. After its third-quarter profit overtook estimates of analysts, the company’s stock soared by nearly 20% in Monday’s extended trading session. In Monday’s trading on the Nasdaq, $NFLX actually closed at $99.80, which was down 1.65% or $1.67. But it was in the after-hours trade that the stock gained 19.65% or $19.61.
What Drove Netflix Profits
Netflix profits have largely been the result of revenue growth that’s been higher than expected, as well as the addition of new subscribers. 3.57 million new subscribers have been added by Netflix globally in the third quarter. The actual figures easily overtook the company’s own forecast of 2.30 million new subscribers for the quarter. The new subscription has resulted in the company ending up with 86.74 million subscribers. The number of new US customers in the quarter has been significantly below the company’s expectations though, only 370,000. In Q4, $NFLX plans to add 5.20 million new memberships - 3.75 million internationally and 1.45 million memberships domestically in the US. These exceed the estimates by Wall Street analysts significantly.
The company’s Q3 profit rose to $51.52 million from $29.4 million, which translates to a surge from $0.07 per share in the last year to $0.12 per share this year. Its Q3 revenues rose from $1.74 billion last year to $2.29 billion this year. Analysts had estimated consensus revenue of $2.28 billion for Q3.
Strong Content Fuels Subscription Interest
Netflix believes that the 36% growth it experienced in streaming revenue was the result of strong content, in terms of excitement and originality, such as Narcos’ second season and Stranger Things. Streaming revenue crossed $2 billion for the company, for the first ever time. The company expects earnings in the fourth quarter to be in the region of $0.13 per share, which is significantly more than analysts had expected at $0.10 per share.
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