Netflix earnings impress as streaming subscriptions soar
Entertainment firm Netflix rose by 8% in after-hours trading following the release of its earnings for the final quarter of 2016, in which it also registered seven million subscriptions.
Nasdaq 100
18,546.23
12:15 17/05/24
Netflix Inc.
$621.10
12:59 17/05/24
During the period 1.93m members were added from the United States and 5.12m elsewhere. These subscription figures were well above what was forecast from the streaming company, who had said predicted 1.45m in the US and 3.75m in other countries.
Netflix's profits are also rising steadily as it aims to conquer more countries with new original content specific to each region. Net income was 56% higher than the same quarter of 2015.
The streaming service recorded Q4 earnings per share of 15 cents and took in revenue of $2.48bn. Analysts had expected earnings of 13 cents per share on $2.47bn in revenue.
Investors had been worried that rising competition from the likes of Amazon's Prime video offering and Hulu would have a significant impact on income, but the company's investment in new original programming at the expense of old bought programming appears to be paying off.
"We don't really believe in hockey-stick businesses, like suddenly we will turn significantly profitable at 200 million members," Reed Hastings, the chief executive of Netflix, said during a conference call. "We think it is much smarter to grow into that bit by bit."
In a letter to the company's shareholders, Netflix said that there were both challenges and opportunities ahead as it faced into 2017.
"In short, it's becoming an internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time," the letter said.
Analysts at Jefferies on Thursday lifted its target price to $95 from $80 and said the better than expected subscriber growth was largely down to the higher growth in international markets, "suggesting a longer tail than we've anticipated".
"While the international subs growth will drive the stock higher, we note cash burn remains above expectations, with fixed cost leverage elusive."