Netflix surges on massive subscriber growth

Ivan Schwartz
October 17, 2018

Netflix is now valued at more than $153bn, more than 21st Century Fox and almost as much as Disney.

The surge came as Netflix premiered a record amount of original programming, including new seasons of Orange Is The New Black and BoJack Horseman. "That's a really good number for a market that's this mature".

Some have begun to question, however, whether Netflix's business model is as durable as the share price action suggests, given the huge investments the company has begun to make in its own content, and burgeoning competition. In the third quarter a year ago, Netflix added 5.3 million subs. The epic drama is Netflix's first original series from India, the world's second-most-populous country.

The analyst doesn't have an official price target for Netflix, but pegs the company's fair value at $377 a share.

Chief Executive Reed Hastings, who has pegged Netflix's content spending at $8 billion this year alone, told investors his firm is in for a battle. Nor does the company release viewership figures for programs, contending that its subscriber growth demonstrates the popularity of its entertainment slate.

Earnings jumped to 89 cents per share, well above a projected 68 cents.

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The figures covering the July to September period took the company's subscriber base to 137 million and reassured investors anxious the company was facing a slowdown in its growth surge.

Wall Street doesn't see Netflix turning cash flow positive within the next four years, according to Bloomberg data.

The company also gave a bullish forecast for growth in the fourth quarter, predicting that it would bring in 9.4 million new subscribers. While the company reports a net profit, it spends more than it takes in and borrows frequently to finance its programming budget. More than 80 million Netflix accounts watched at least one of those films, like To All the Boys I've Loved Before, Netflix said.

The company exceeded forecasts in both USA and global markets but the bulk of the new subscribers came from outside the United States, where the company has been investing aggressively.

On October 10, WarnerMedia announced it is entering into the streaming game with a direct-to-consumer streaming service set to launch at the end of next year.

The company is close to purchasing a production facility in Albuquerque, New Mexico, and recently leased a second office tower in Hollywood. "We're just going to focus on that for a very long time".

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