Netflix Shares Surge on Subscriber Growth


netflix

The video service provider Netflix (NASDAQ:NFLX) has reported a jump in new subscriber growth. The online video streaming service announced a 21% increase in US subscriber numbers, comfortably beating analyst’s prior expectations.

The jump in new subscriber levels was impressive. The addition of 3.20 million international subscribers over the third quarter was far in excess of prior estimates of 2 million. The company has been under scrutiny recently on fears of slowing growth and the ability to increase its subscriber base.

The company has sought to expand into international market in an effort to counter fears of slowing growth. It now operates in over 130 markets worldwide. It has also recently announced plans to license its content to service providers in China.

In addition to offering film streaming services, the company has invested heavily in building a library of ‘original’ TV shows. Top titles include House of Cards, Arrested Development and Orange is the New Black. These are promoted as Netflix exclusives. It is this presence of quality titles that has helped to garner such an impressive growth rate in subscribers.

The company has grown rapidly in recent years on the back of changing audience behaviors. So called ‘binge watching’ has become the new normal. Rather than watching broadcast episodes at the rate of one per week, increasingly viewers are demanding whole series or box sets. Episodes are often viewed back to back. In some cases series can be viewed in just one sitting.

Netflix sits as the current global leader in terms of online streaming services. It’s main competitor Amazon is however pushing hard to gain market share. Its video and movie streaming service, offered as part of the Amazon Prime subscription has itself seen some impressive growth since launch. In addition the service can now be accessed with a choice of either monthly or annual subscription plans.

Netflix shares spiked to $100.42 after hours, a gain of 17.62% on the day. Some $10 billion was added to the market capitalization as a result. Shares hit a high for the year.

netflix share price

Outlook

However despite this latest gain they still sit short of the high of $130.94 posted on Dec 4th 2015. While the company may have abated analysts worries for now, to maintain its growth trajectory the company will have to show continued subscriber growth.

Many analysts are backing further short term growth in the company. Placing a long contract on further appreciation could yield results. This would be one way to play expected better fourth quarter figures and further subscriber growth. However it is important to note that the company still generates negative cash flow. No doubt the battle between the major providers is only just starting to hot up.