Netflix is attracting millions of new subscribers by its original programs. In fact, customers of Netflix are increasing surprisingly fast.
The entertainment company got 7.4 million new customers from January to March. Investors are happy with the company’s performance. Moreover, the feel confident, the video-streaming pioneer’s massive investment will pay off.
New shows helped Netflix smash analysts’ subscriber estimates, and its better-than-expected second-quarter outlook soothed concerns about competition from Apple Inc and Amazon.com Inc, Reuters reported.
Shares of Netflix jumped more than 7% in after-hours trading on Monday to $330.30. The stock is the top performer on the S&P 500 this year, gaining more than 60%.
“I don’t think this is a one-time thing,” said Chaim Siegel, an analyst at Elazar Advisors. “It’s very similar to the results we saw last quarter. It’s getting better.”
Wall Street expected Netflix to add 6.5 million new subscribers, according to FactSet data. Netflix topped that and also said it would bring in 6.2 million more customers from April through June, 1 million more than analyst predictions.
Netflix says it will spend up to $8 billion on global TV shows and movies in 2018. As it has expanded to some 190 countries, investors accepted negative free cash flow in exchange for the potential of outsized growth in future years.
“We have big plans for content growth and you should expect that to continue,” Chief Executive Reed Hastings said on a post-earnings webcast.
In the first three months of the year, Netflix boosted original programming by 85% from a year earlier to a record 483 hours, according to Cowen & Co analysts.
For the just-ended quarter, revenue grew 40% year-over-year to $3.7 billion, the fastest pace in the company’s history. The average cost of a Netflix membership rose 14% during that time, and customer ranks swelled to 125 million.
“Subscribers are accelerating even at higher pricing,” BTIG analyst Richard Greenfield said. “Content spend is having a direct effect on its subscriber growth.”