Netflix’s stock jumps 7% on huge spike in new subscribers, surge in ad sales
Netflix Inc.’s stock popped nearly 7% after hours Tuesday following its quarterly results, which showed a splurge in ad-fueled sales and a healthy increase in new subscribers.
The video-streaming behemoth
NFLX,
reported fourth-quarter earnings of $938 million, or $2.21 per share, compared with $55 million, or 12 cents per share, in the same quarter a year earlier. Sales improved 12.5% to $8.83 billion from $7.85 billion in the year-ago quarter.
Highlighting the three-month period was a huge hike in net subscriber additions, a whopping — and record — 13 million. Analysts were forecasting an increase of 8.7 million.
“Our healthy top-line growth reflects the benefits of paid sharing, our recent price changes and the strength of our underlying business driven by a strong slate,” Netflix executives said in a letter to shareholders announcing the results.
Netflix vowed to forge ahead in a fast-changing industry roiled by escalating content costs and internal austerity programs. On Tuesday, it inked a 10-year, $5 billion deal to stream the World Wrestling Entertainment Inc.’s
TKO,
flagship “Raw” program on Mondays, starting in 2025.
Read more: WWE’s ‘Raw’ to run exclusively on Netflix for 10 years
During a live-streaming call Tuesday with questions from analysts, Netflix co-chief executive Ted Sarandos said the WWE deal “fits inside” its annual content budget of $17 billion. He said it does not signal a change into other forms of live programming for major sports leagues.
“As our competitors adjust to these changes, it’s logical to expect further consolidation, particularly among companies with large and declining linear networks,” the letter added. “We’re not interested in acquiring linear assets. Nor do we believe that further M&A among traditional entertainment companies will materially change the competitive environment given all the consolidation that has already happened over the last decade.”
Analysts tracked by FactSet projected Netflix to report $2.22 a share in adjusted earnings on $8.72 billion in revenue.
Shares of Netflix have climbed 35% over the past 12 months. The S&P 500
SPX
is up 21% over the same period.
Netflix offered robust fiscal first-quarter revenue guidance of $9.24 billion, vs. a $9.27 billion forecast by FactSet.
“These results offer a proof point that you can spend less on content and still attract and retain subscribers,” Scott Purdy, U.S. national media leader for KPMG, said in an email message on Tuesday. “Today’s results show going back to the basics — ads and bundling — will be the blueprint other streaming companies follow to turn a profit.”
In the weeks leading up to Tuesday’s report, analysts had been predicting big numbers for Netflix’s new advertising-supported tier.
Its pace of growth “suggests plenty of room for [subscription] growth in 2024,” Oppenheimer analyst Jason Helfstein said in a Jan. 12 note, while raising his price target on Netflix shares to $600. Helfstein also raised his fourth-quarter estimates for net additions to more than 10 million from 9 million, and for 2024 additions to more than 24 million from 21 million-plus.
Read more: Netflix’s ad model and sharing crackdown are paying dividends
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