Netflix shares spike higher on strong growth in overseas subscribers

Netflix shares are surging ahead of the opening bell on Wall Street after the company reported it it had reached a total of 104m subscribers worldwide.

Over the three months ending on 30 June, the company added roughly 1.1m new US domestic subscribers to its streaming video service to reach 51.92m and a further 4.1m international ones to 52.03m.

The company beat forecasts on both fronts, especially on the latter.

It was also the first time that its overseas subscriber base was larger than the domestic one and the company's stated strategy was to capitalise on that growth by further diversifying its business model.

Netflix intended to do that with the release of 40 feature films, from 'big budget popcorn films to grassroots cinema' and by creating serialised localised content via "significant investment" for their new markets, hoping to generate even more international subscribers.

By the end of the 2017, Netflix was planning on spending a further $6bn on original programs in addition to the $1bn spent on marketing for their large library.

Perhaps even more impressively than its subscriber numbers figures, Netflix received 91 nominations at this year's Emmys only bested by the home of Game of Thrones, HBO. That was well ahead of other online streaming competitors such as Hulu and Amazon.

It's new program Stranger Things accounted for 18 of the nominations, with long running series House of Cards showing quite well also.

Netflix's soaring share price was evidence of the advantage of focusing more on original content rather than maintaining a library of pre-existing content.

Analysts at Citi were of a similar view, telling clients that 44% year-on-year growth in the company's overseas subscriber base suggested that the firm's content was resonating with subscribers.

However, that was not to say such growth hadn't come at a cost. Indeed, management increased its forecast for free cash flow burn in calendar year 2017 to between $2.0bn to $2.5bn, up from roughly $2.0bn before.

Furthermore, as streaming competitors continued to invest their own capital in home grown content all the while vying for the attention of viewers some observers saw the risk that costs could begin to soar for the Los Gatos, California-based outfit.

On a related note, Citi added: "Further outperformance [in the share price] would require investors to ascribe far more value to Netflix's newer international markets, where execution is unproven."

As of 1235 BST shares of Netflix were up by 9.64% top $177.29.