Published On: Mon, Apr 16th, 2018

Netflix adds 7.41 million subscribers, boosting its stock price

LOS ANGELES—Netflix Inc. posted its strongest start to a year since the company went public 16 years ago, thanks to fast growth in markets across Latin America and Europe.

The company added 7.41 million subscribers in the first quarter of the year, according to a company statement Monday, easily topping analysts’ projections. Netflix now has 125 million paying customers, the most of any online TV network.

The company, the best-performing stock in the S&P 500 this year, is proving one quarter at a time that investors’ confidence in its online TV service has been justified. Netflix is using its growing subscriber base and deep pockets to poach talent from the biggest program suppliers and build a Hollywood studio for the internet age.

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Other big technology companies, including Amazon.com Inc., Apple Inc., Alphabet Inc. and Facebook Inc., also rose after the results were announced. While none moved more than 1 per cent, the gains marked a positive start to earnings seasons for a sector that’s been under pressure in recent months.

Netflix, based in Los Gatos, Calif., said first-quarter profit rose to 64 cents a share, from 40 cents a year earlier. That met analysts’ projections of 64 cents. Sales for the quarter grew 40 per cent to $ 3.70 billion, compared with Wall Street projections of $ 3.69 billion.

For the current quarter, Netflix is predicting earnings of 79 cents and revenue of $ 3.93 billion. That compares with analysts’ estimates of 65 cents a share in profit and sales of $ 3.89 billion.

Building a studio

Netflix has told investors it will save money by bringing development and production in-house and avoiding the markups imposed by rival studios. But spending is still growing as the company expands production in areas such as film, unscripted series and kids programming.

Total streaming content obligations grew to $ 17.9 billion in the first quarter, up from $ 17.7 billion three months earlier, and that doesn’t account for the ballooning budget to market shows.

Netflix said Monday it now makes about as many unscripted shows as any cable network. The company already makes more movies than any studio, with about 80 on tap for all of 2018, and more than one standup special a week.

In February, producer Ryan Murphy agreed to leave 21st Century Fox Inc., where he made American Horror Story, for a deal at Netflix worth a reported $ 300 million. Earlier, the company signed Scandal producer Shonda Rhimes, who left her long-time home at Walt Disney Co.’s ABC to make shows exclusively for Netflix.

First quarter

In the last quarter, the company released the documentary miniseries Wild, Wild Country, the second season of the Marvel comic series Jessica Jones and the horror film The Cloverfield Paradox, three of about 700 titles the company planned this year.

While Netflix reports a profit, its cash flow last quarter was a negative $ 287 million, and investors will be paying close attention to whether the company plans to take on more debt, as it has every year since the company started releasing original programming several years ago.

Netflix has allayed concerns about its cash burn by continuing to add subscribers, convincing investors that the spending is effective. Customers have also demonstrated they are willing to pay more for Netflix, boosting the company’s margins in the process.

Netflix still adds the most customers every month in the U.S., according to analysts’ estimates. Last week, Comcast Corp. said it would offer Netflix subscriptions to its cable TV service, giving the world’s largest streaming platform another way to boost its viewer base in the U.S., its biggest market.

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Netflix adds 7.41 million subscribers, boosting its stock price