Published: Wed, October 17, 2018
Culture&Arts | By Dora Pope

Netflix Adds 7 Million Subscribers, Beats Estimates, Sends Stock Soaring 12%

Netflix Adds 7 Million Subscribers, Beats Estimates, Sends Stock Soaring 12%

Analysts had cut their price targets for Netflix shares ahead of its earnings report, citing a combination of the strength of the dollar, rising expenses and interest rates.

Netflix added almost 7 million subscribers in the quarter, easily beating its estimates - and Wall Street expectations - of 5 million.

But the company also benefited from signing up lots more new subscribers than it expected.

Shareholders had raised concerns over its growing debt to pay for original content to differentiate itself from competitors and repeat successes like House of Cards, The Crown and Stranger Things.

Netflix is the first of the so-called Faang companies (Facebook, Apple, Amazon, Netflix and Google) to report this quarter.

Watch Netflix trade in real time here.

In a letter to shareholders Netflix said that it expected operating margin to be nearer 10pc for 2018, meaning that it will see margins drop in comparison to previous year.

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Netflix reported 1.09 million domestic subscriber additions, surpassing estimates of 673,800. Subscriber growth was stronger than expected in the US and overseas. Analysts were expecting 4.8 million - 600,000 in the USA and 4.2 million internationally, according to Nomura Instinet.

Executives said audiences welcomed shows tailored to specific markets, such as "Sacred Games" in India, which the company identified as key to its expansion.

The future is looking even brighter for Netflix as the video streaming outfit forecast paid net additions of 7.6 million and total net additions of 9.4 million, up 15 percent and 13 percent compared to the 6.6 million and 8.3 million from the year-ago quarter.

Netflix's gains, including those that came in after-market trading Tuesday, have cleared $3.63 billion from the accounts of short sellers so far this year, Ihor Dusaniwsky, managing director at financial analytics firm S3 Partners, noted in a tweet. Of that total, 1.09 million are based in the US, while 5.87 million are based overseas. It has issued a net $7.5 billion of bonds in less than three years, though that could carry a cost in a changing economic environment.

Netflix released a series original movies as part of its "Summer of Love" over the past few months, including "Set It Up", "The Kissing Booth", "Like Father", "Sierra Burgess Is a Loser" and the aforementioned "To All the Boys I've Loved Before".

The additions helped lift profit more than threefold to 89 cents a share, beating the 68-cent average of analysts' estimates.

Total revenue rose to $4 billion, in line with analysts' expectations, from $2.98 billion a year earlier.

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