Netflix 3Q: Net Adds Up, More MVPD Integration Expected

Netflix shares skyrocketed 20% Mon after the company reported better-than-expected net new sub adds domestically and internationally in 3Q, as well as YOY revenue growth. The price jump to $120 per share from Friday’s $99.80 closing price came after Netflix had its weakest sub growth in 2 years in July. Before Thurs’ earnings release, the company’s stocks have dropped nearly 15% since the beginning of 2016. During the quarter, the company added 0.4mln new subs (vs. its forecast of 0.3mln) in the US and 3.2mln members (vs. its forecast of 2mln) internationally. The over-performance against forecast (86.7mln total streaming members vs. forecast of 85.5mln) was driven mainly by stronger than expected sub acquisition driven by a strong content slate including “Stranger Things” and the 2nd season of “Narcos,” execs said during Mon’s earnings conference call. Financially, quarterly global streaming revenue exceeded $2bln for the first time (up 36% YOY). CEO Reed Hastings said he doesn’t expect price increase in the near term. For 4Q, the company forecast 5.2mln global net adds, with 1.45mln net adds in the US and 3.75mln new members internationally. The expected moderate YOY decline in net adds reflects the completion of un-grandfathering, according to Netflix. The streaming service has cozied up to cable MSOs this year, inking a deal with Comcast to integrate Netflix with the operator’s X1 platform. Hastings said he hopes more MVPD deals like this contribute positively to revenue over time. And the Comcast integration isn’t necessarily about adding more subs because Comcast customers tend to be advanced, high-income households, many of which already have Netflix subscription. It’s about making it easier for people to access Netflix, thus adding value for customers, Hastings said: “The more devices we are in, the easier it is to use.” CFO David Wells said the company got an early preview of MVPD integration with its Virgin Media partnership. Meanwhile, Netflix has no current plans to join key competitor Amazon in offering offline viewing: “We are open to it. It’s something we are looking at, but we have nothing specific to offer now.”

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