Netflix nears 100 million subscribers

For the 1st quarter of this year, Netflix has added 5 million members to its total subscriber base to almost hit 99 million users. Netflix, in a letter to shareholders, said, “We expect to cross this 100 million member mark this weekend. It’s a good start.”

In the U.S., it boosted its subscriber base by 1.42 million subscribers. Analysts had an average estimate of 1.50 million.

Almost 48 million of its subscribers are outside America while 51 million are in the U.S. Michael Oson, a Piper Jaffray analyst believes that by the end of 2017, the majority of Netflix’s subscribers will be overseas. Netflix has invested heavily in original content to get subscribers.

Reed Hastings, Netflix CEO, said, “Our viewing is very large and growing, but nowhere near as big as YouTube. We definitely have YouTube envy.”

According to Michael Pachter, Wedbush Securities analyst, “Over the past decade, what really did it for Netflix was the explosion of phones and tablets that allowed people to watch video everywhere. But Netflix clearly had a vision before those devices became so ubiquitous.”

The current market value of Netflix is around $63 billion. Its stock increased by $1.67 to $148.92 in Monday’s trading despite missing a little management forecasts of its subscriber growth numbers.

For this year, Netflix plans to spend more than $1 billion to boost member acquisition. It will also invest over $6 billion in programming. Last year, it spent $5 billion on programming.

Some of Netflix’s successful original shows include The Crown, Gilmore Girls and Black Mirror. It also signed exclusive deals with artists with an international appeal. This includes Adam Sandler and Shah Rukh Khan.

Netflix has also increased its investment in standup comedy. This includes a Dave Chappelle collection.

Netflix will stay away from providing football related content. Netflix, in a shareholder letter, said, “That is not a strategy we think that is smart for us since we believe we can earn more viewing and satisfaction from spending that money on movies and TV shows.”

Netflix is open to the idea of its original films being shown at movie theaters such as AMC and Regal but only if it’s released at the same time on Netflix.

For some analysts, Netflix’s cash burn is a major concern. Streaming content obligations have skyrocketed to $15.3 billion compared to last year’s $12.3 billion. Pachter said, “We continue to believe that Netflix cash burn is important and is largely overlooked by investors.”

For the 1st quarter of 2017, Netflix announced that its net income grew to $178 million which represent earnings per share (EPS) of 40 cents per share compared to last year’s $28 million which represents an EPS of 6 cents. Wall Street analysts were projecting Netflix’s EPS to be 37 cents. In this regard, Netflix beat analysts’ expectations.

Netflix’s international operations had an operating profit of $43 million for this quarter, but the company is forecasting to lose $28 million for its international operations this quarter.

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