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Netflix stock soars after company reports stellar results

by | 23 Jan, 2018

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Netflix founder and CEO Reed Hastings

Shares in Netflix have jumped by over 12 per cent to an all time high above $250 after the company reported impressive earnings for the fourth quarter of 2017, pushing the valuation of the company past $100 billion for the first time. Despite the big jump in after hours trading on Monday, shares moved even higher this Tuesday!

Subscriber numbers were the key metric investors were watching out for in the latest report and the firm did not disappoint, adding 8.3 million subscribers in the 3 months to December last year.

Over 6 million of those came from outside the U.S. representing a rapidly growing international audience. The figures showed that Q4 2017 was the best quarter for subscriber adds in the history of the company.

Profits for Q4 were $186 million, almost 3 times higher than for Q4 2016, with earnings per share of $0.41 against $0.15 in Q2 2017.

Some investors were skeptical that an increase in subscriber fees that the firm enacted in October last year would put off users, but it seems to have had little impact. The firm raised prices for its standard and premium memberships, attributing this to increasing costs for providing original content (over 1,000 hours of which was added in 2017).

Indeed, the company cited its content strategy as being one of the key reasons for the robust membership growth and is planning even more content spending in future, saying: “We believe our big investments in content are paying off. In 2017, average streaming hours per membership grew by 9% year-over-year. With greater than expected member growth (resulting in more revenue), we now plan to spend $7.5-$8.0 billion on content on a P&L basis in 2018.”

Speaking to CNBC, Enderle Group president Rob Enderle said: “The fact Netflix is growing strongly on both the top and bottom line indicates the strategy is working.”

Related: What are the biggest risks for investors in 2018? Invstr CEO Kerim Derhalli gives his take

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Netflix stock rallied heavily on Monday/Tuesday

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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