Netflix Stock Spikes After Company Reports 2017 Financials

Company added 8.3 million new members in Q4, the highest in company history.

Subscription News: Netflix Stock Spikes After Company Reports 2017 Financials

Source: Netflix

Investors were apparently impressed with Netflix’s fourth quarter and 2017 year-end report. On January 22, the day Netflix (NASDAQ: NFLX) released its Q4 and year-end financials, stock was valued at $227.58 per share. As of 7:59 PM Eastern yesterday, Netflix was valued at $250.29 per share, an increase of $22.71. Investors had a lot to impressed with. Netflix reported it had grown its streaming revenue to more than $11 billion in 2017, a 36 percent increase over the prior year. In addition, Netflix added 24 million new members last year, a 5 million member increase over 2016.

Subscription News: Netflix Stock Spikes After Company Reports 2017 Financials

Source: Google Finance

‘We had a beautiful Q4, completing a great year as internet TV expands globally,’ Netflix said in its January 22 shareholder letter. ‘In 2017, we grew streaming revenue 36% to over $11 billion, added 24 million new memberships (compared to 19 million in 2016), achieved for the first time, a full-year positive international contribution profit, and more than doubled global operating income.’

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Quarterly highlights for the fourth quarter of 2017 included:

  • Total revenue for Q4 was $3.3 billion, a 32.6 percent increase year-over-year.
  • Streaming revenue was $3.2 billion, a 35.3 percent increase year-over-year.
  • U.S. streaming revenue was just over $1.6 billion; international streaming revenue was just under $1.6 billion.
  • Operating margin was 7.5 percent.
  • Net income was $186 million, or $0.41 per diluted share.
  • Netflix reported 110.6 million paid memberships and 117.6 million total memberships, with net additions of 8.3 million. The net additions for the quarter were the highest in company history.
  • Average paid streaming memberships increased by 25 percent year-over-year.

Annual highlights include:

  • Total revenue was $11.7 billion, compared to $8.8 billion for the same period last year.
  • Net income of $558.9 million or $1.25 per diluted share, compared to $0.43 per share for the same period last year.
  • Annual streaming hours per membership grew 9 percent year-over-year.

Netflix is forecasting the following for 2018:

  • Global net member additions of 6.35 million in Q1, compared to 5.0 million for Q1 2017
  • Full year operating margin of 10 percent
  • Content spending of $7.5 billion to $8.0 billion
  • Marketing spending of $2 billion
  • Technology and development investment of $1.3 billion

In addition to the numbers, Netflix shared that returning seasons of The Crown, Black Mirror and Stranger Things have done well globally. Other popular programs include Bright, Godless, Marvel’s The Punisher, Mindhunter and a number of international originals like Club de Cuervos, The Day I Met El Chapo and Suburra. Netflix said it is partnering with more MVPDs and ISPs across the world to make it easier for members to access Netflix. The company also said that it supports net neutrality and it is backing the Internet Association’s challenge to the FCC’s repeal of net neutrality in December.

In terms of competition, Netflix said it expects Amazon Studios and Apple to put up big content budgets, but they aren’t the only competitors to watch.

‘Facebook and YouTube are expanding and competing in free ad-supported video content. With their multi-billion global audiences, free ad-supported internet video is a big force in the market for entertainment time, as well as a great advertising vehicle for Netflix,’ the company said.

‘Traditional media companies are also expanding into streaming. Disney is in the process of acquiring most of 21st Century Fox and plans to launch a direct-to-consumer service in 2019 with a beloved brand and great franchises,’ Netflix said. ‘The market for entertainment is vast and can support many successful services. In addition, entertainment services are often complementary given their unique content offerings. We believe this is largely why both we and Hulu have been able to succeed and grow.’

Subscription News: Netflix Stock Spikes After Company Reports 2017 Financials

Yahoo Finance

Insider Take:

That last sentence really sums it up. Yes, there is plenty of competition, but each service offers unique content – some of it original and some of it exclusive – that no one else is offering. This content differentiates one service from the next, and in this day and age, it is easy to sign up for multiple services to get the programming you want. In fact, if you cut the cable cord, you could save money and still get the same shows and more by subscribing to the services that offer the content you want.

Despite the growing competition, Netflix continues to post record revenue and membership numbers. As long as Netflix continues to provide a quality streaming service with original and exclusive content, they will continue to draw new members and retain their existing membership base.