Netflix Stock Soars as it Announces Higher than Expected Q3 Subscription Numbers

Netflix Stock Soars as it Announces Higher than Expected Q3 Subscription Numbers

Netflix shares soared over 20% in late trading on Monday, as the premium streaming service announced it had added over 50% more subscribers than expected in the third quarter of 2016.

Netflix Stock Soars as it Announces Higher than Expected Q3 Subscription Numbers

Reuters:

The company’s performance represented a turnaround from the previous quarter of disappointing subscription growth. Netflix, which has spent heavily to expand outside its home market, also said that it was on track to start harvesting “material global profits” next year, even as it raised spending on original programming.

Shares of Netflix rose to $119.82 in extended trade from a close of $99.80.

Netflix’s original programming, which includes such shows as Stranger Things, Luke Cage, and Narcos, helped draw new international subscribers. Netflix added around 3.2 million new international subscribers in the third quarter, well above the 2.01 million new international subs that analysts had expected.

Meanwhile, Netflix also attracted more subscribers in the United States than had been expected, adding 370,000 U.S. subscribers, again bettering analyst expectations of 309,000 .

“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. However, Pachter said he thought the continuing cost of developing new shows would undermine plans to deliver material profits in 2017.

While the streaming service has expanded into over 130 markets internationally, it still hadn’t made inroads into China. The firm announced on Monday that it was dropping plans for a Chinese launch in the near future, and would instead license its shows in the country. It said it still hopes to launch service in China, “eventually.”

Netflix’s original content appears to be a great draw, and the service announced it will spend $6 billion on original content in 2017, a $1 billion bump from what was spent in 2016.

While the service faces continued competition from other services, such as Amazon prime and Hulu, it expects to add 1.45 million new U.S. subscribers in the current quarter. It also expects to add 3.75 million international subscribers in the same time period.