Netflix, Inc.’s (NFLX - Free Report) hefty outlay on content and overseas expansion has paid off in a big way. The Los Gatos, CA-based streaming service added 7.4 million customers in the first quarter, squashing analysts’ estimates by around 1.7 million. International streaming has contributed the most, with net gains of 5.46 million users. In fact, its international segment accounted for 55% of total memberships. Europe and Latin America streaming also contributed significantly, while U.S. additions totaled 1.96 million (read more: Netflix Crushes Subscriber Growth Estimates, Adds 7.4 Million Streaming Users).
Netflix has been able to add subscribers even after hiking the price of its streaming service. This is a clear indication that the company has been able to deliver sought-after content. Netflix also plans to introduce popular shows in other languages such as the Spanish-language robbery thriller called “La Casa de Papel” or “Money Heist” in English.
Revenues & Earnings Strengthen in Q1
An expanding customer base along with higher prices for the streaming service gave a boost to Netflix’s revenues. The company said that its streaming revenues have improved 43% year over year in the first quarter — the best in history. The company’s revenues totaled $3.7 billion, topping the Zacks Consensus Estimate of $3.69 billion
Apart from adding a record number of subscribers, Netflix saw stunning growth in profits. Netflix posted $290.1 million in net income in the first quarter, higher than the profits generated by the streaming giant in the entire year of 2016.
And if the company is able to meet its forecasted $358 million profit in the second quarter, it will be able to earn more than what it generated in the entire of 2017. The stock, by the way, has posted adjusted earnings of 64 cents per share in the first quarter, edging past the Zacks Consensus Estimate by a penny (read more: Netflix Stock Soars, Adds 7.41 Million Members in Q1).
Shares Jump in After-Hour Trading
Netflix closed down 1.2% at $307.78 on Apr 16, but jumped more than 6% in after-hour trading following reports on subscriber additions and higher profits.
In fact, the company’s projected growth rate for the current year is more than 100%, while the Zacks Broadcast Radio and Television industry is expected to gain only 20.6%.
Netflix Stock Verdict
Netflix has proven that despite the escalated service charges, it can attract a record number of users. To top it, investors have seen two earnings estimates move higher, compared with none lower, at least when looking at the current-year time frame. And the consensus estimate for the company’s earnings has trended upward over the past 60 days, as estimates have risen from $2.73/share to $2.74/share right now.
And if you happen to be a growth investor, you should definitely give Netflix a thought. It has a trailing 12-month Return on Equity (TTM) of 20.08%, which is above the broader Media industry’s average of 15.85%. This shows that the company has been able to convert the cash invested into gains in a better way than peers.
If this wasn’t enough, Netflix carries a Zacks Rank #2 (Buy). Some other stocks worth considering from the same space are AMC Networks Inc. (AMCX - Free Report) and Tribune Media Company (TRCO - Free Report) . Both of them sport a Zacks Rank #1 (Strong Buy). YYou can see the complete list of today’s Zacks #1 Rank stocks here.
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