Netflix stock soars after adding more subscribers than expected
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Netflix's stock jumped more than 6% in after-hours trading Tuesday after the company said it added 13 million net new streaming subscribers, handily beating analyst expectations of 8 million.
Why it matters: Better-than-expected subscriber growth last quarter suggests the streamer's efforts to retain users through cracking down on password-sharing and offering a cheaper ad-supported tier are working.
- Beating Wall Street expectations also suggests Netflix's price hikes introduced last quarter haven't impacted subscriber growth.
- Data shows Netflix beating its streaming rivals consistently for the past year on low churn rates, the number of subscriber cancellations or subscription lapses.
Yes, but: Despite impressive subscriber numbers, Netflix's financial results were otherwise mixed for the last three months of the year.
- The company beat Wall Street expectations slightly on revenue but missed on earnings per share.
The big picture: Heading into earnings Tuesday, Netflix's stock was up more than 50% in the past year as it continued to beef up its cash reserves.
- Netflix is still the only major streaming company that's profitable.
- Hollywood strikes and changing Wall Street expectations around profitability have forced its competitors, who have wider remits than just streaming, to rethink their streaming investments.
What to watch: Given the current pullback in streaming investments from major entertainment companies, consolidation is expected, but Netflix told investors Tuesday it doesn't plan to get involved in buying those assets.
- "We're not interested in acquiring linear assets," the company said in a letter.
- "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."
- Netflix listed as examples Viacom and CBS; AT&T and Time Warner; Disney and Fox; and Time Warner and Discovery.
Of note: Netflix said it will focus its investments on boosting its content offering for subscribers.
- Earlier on Tuesday, the company announced a landmark $5 billion, 10-year deal with the WWE to air "Monday Night Raw," one of TV's longest-running weekly episodic programs.
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