Netflix set to open at record high after earnings beat (NFLX)
Netflix reported earnings that beat expectations Monday afternoon, sending the stock up more than 10 after hours%
The streaming giant posted modest growth at home in the US, and even more from abroad.
Shares of Netflix are set to open at a record high near $251 on Tuesday after the streaming giant posted earnings that once again beat analyst expectations for revenue and subscriber growth.
The company reported earnings of $0.41 per share after the bell Monday on revenue of $3.29 billion, which sent the stock up over 10% in after hours trading.
Netflix has been adding more subscribers internationally than in the US in recent quarters, and this period was no exception. Netflix added a total of 8.33 million subscribers — 2 million more than expected — with 1.45 million added from the US and 4.9 million internationally. Both measures were better than expected.
"We had a beautiful Q4, completing a great year as internet TV expands globally," the company said in a letter to shareholders. "In 2017, we grew streaming revenue 36% to over $11 billion, added 24 million new memberships (compared to 19 million in 2016), achieved for the first time a full-year positive international contribution profit, and more than doubled global operating income."
The growth has been fueled by mega-hits like "Stranger Things 2." UBS analysts predicted last week that new shows from the fourth quarter, namely "Ozark" and "Mindhunter," have generated just as much subscriber excitement as hits like "House of Cards" or "Narcos."
Netflix warned that its free cash flow will be between $-3 billion and $-4 billion in 2018 as it invests to take on competitors who are rapidly launching their own competing streaming services, the largest of which being Disney. "We are striving to make the right choices and investments to grow the value of the firm," the compay said "and that is what also ultimately secures our debt. High yield has rarely seen an equity cushion so thick."
The spending should help Netflix stave off any new competition as other companies develop their own streaming products, namely Disney, which is already pulling its content from Netflix and plans to launch its own service in 2019.
"The market for entertainment time is vast and can support many successful services," Netflix said. "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."
So far, this strategy appears to be paying off, with smash hit originals like "Stranger Things" continuing to draw in new subscribers and offset any pushback from the price hike that went into effect in the fourth-quarter.
Shares of Netflix have gained 65% in the past year.
Here are the key numbers for Netflix's Q4 earnings:
Q4 EPS (GAAP): $0.41 versus Wall Street estimates $0.41.
Q4 revenue: $3.28 billion versus Wall Street estimates of $3.28 billion.
Q4 US subscriber growth (net additions): 1.98 million net adds, versus Wall Street estimates of 1.29 million net adds, and Netflix forecast of 1.25 million.
Q4 international subscriber growth (net additions): 6.36 million net adds, versus Wall Street estimates of 5.05 million, and Netflix forecast of 5.05 million.
Q1 US subscriber growth guidance (net additions): 1.45 million net adds, versus Wall Street estimates of 1.28 million net adds.
Q1 international subscriber growth guidance (net additions): 4.9 million net adds, versus Wall Street estimates of 3.90 million net adds.
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