“Netflix and Disney are investing heavily and will be two big brands in the premium space,” said CEO Reed Hastings.
Netflix (NFLX) – Get Netflix Inc. Report shares are set for their strongest opening bell gain in six year Wednesday after the streaming media service blasted Wall Street’s third quarter earnings forecast and added more than 2.4 million new subscribers ahead of the launch of its highly-anticipated ad-supported service next month.
Hits such as ‘Stranger Things’, ‘The Watcher’ and ‘Dahmer – Monster: The Jeffrey Dahmer Story’ helped Netflix reverse first half losses of more than 1.2 million subscribers, with third quarter additions surging to 2.41 million, nearly two-and-a-half times the Street consensus forecast. That takes is overall global total to around 223.1 million, coming in just ahead of Disney’s 221.1 million.
Netflix said it will add around 4.5 million subs over the final three months of the year, essentially matching analysts’ forecasts, with revenues of around $7.776 billion and a bottom line of 36 cents per share. The group noted, however, that starting next quarter, it will no longer guide investors on paid subscriber additions, focusing instead on revenues, margins and earnings.
For the three months ending in October, Netflix posted a bottom line of $3.10 per share, down around 3% from last year but nearly a $1 ahead of the Street, on revenues of $7.925 billion.
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“Well, thank God, we’re done with shrinking quarters,” CEO Reed Hastings told investors on a conference call late Tuesday. “Everything the company is focused on, whether that’s on the content side, on marketing, lowering prices to the ad supported, the paid sharing, the thoughtful approach we’re doing there lines us up for a good next year.”
“Around the world, smart TV is continuing to get to every home in the world that has a TV,” he added. “We have the best suggestions in the world, the lowest prices, all the classic competitive dynamics. So, we’re pretty excited about this next phase, which is competitive excellence.”
Netflix shares were marked 14.1% higher in pre-market trading to indicate a Wednesday opening bell price of $274.88 each, a move that would be the strongest market open since October of 2016.
Netflix will launch its ad-supported service in November, at a price of $6.99 per month, but CFO Spence Neumann noted that the group doesn’t expect a
“big financial impact” as it rolls the new platform out across its various global regions.
“And there’s some other near-term limiters to our growth,” Neumann added, including the headwinds of a stronger U.S. dollar. “There’s penetrating the connected TV market and the sales cycle there. We’ve got competition. We’ve got some macro strain, whether it’s higher inflation, energy prices, and some of the geopolitical strain around the world.”
“So, all those things are factored into our guide. It’s a little bit less visibility than we typically would see,” he added. “But overall, we feel really good that we’re building that momentum. We’ve set a path to the growth.”