Netflix (NFLX) Jumps on Q3 Earnings

Netflix (NFLX) Jumps on Q3 Earnings

Netflix (NFLX) Jumps on Q3 Earnings

Analysts had expected just two million new worldwide subscribers, but Netflix's investment in its own shows and films sprang a surprise. Overall, Netflix turned a rather slight $52 million profit in the last quarter, based on $2.3 billion in revenue.

The company said its strong original content lineup such as "Stranger Things", and "Narcos" helped push it to the revenue gain up 36 percent year over year. Its Q2 report was disappointing for investors. The company also issued weak US subscriber guidance for the fourth quarter (1.45 million), as management expects some continued impact from grandfathering.

"We are now in the fourth year of our original content strategy and are pleased with our progress". Take original content for example: "In 2017, we intend to release over 1,000 hours of premium original programming, up from over 600 hours this year", explained Netflix, which plans to spend around $6bn on that original content in 2017.

With the U.S. market older and more mature, Netflix is relying on global gains to fuel its growth in the years ahead, including the 130 new territories the company began serving in January.

"We still have a long-term desire to serve the Chinese people directly, and hope to launch our service in China eventually", the company said.

Analysts on average were expecting 1.27 million additions, according to research firm FactSet StreetAccount.

"Investors appear laser focused on subscriber growth, and so long as Netflix delivers on that metric, investors will bid its shares up", said Wedbush Securities analyst Michael Pachter. It also posted 3.2 million members internationally vs. its forecast of 2 million.

"Another key story this quarter was the company's increase in its investment in owned and original content, which resulted in both an acceleration in free cash flow burn in the third quarter and an increase in management's outlook for cash burn in 4Q16 and CY17", said Mark May, an analyst with Citi.

The company also signed up 3.6 million new subscriber accounts, which The Verge reports is over a million more subscribers than the company had expected to add.

In China, where local regulations have prevented Netflix from entering, prospects still don't look good, chief executive officer Reed Hastings said earlier this month.

Revenue increased 31.7 percent from the Q3 2015 to $2.29 billion with a profit of $51.5 million, earnings of 12 cents a share.

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