Netflix Subscribers, Earnings Way Up; Wall Street Gets it Wrong
Netflix announced its Q3 2016 earnings yesterday, surprising Wall Street and sending its stock soaring. The subscription video-on-demand leader announced that it added 370,000 subscribers in the United States and 3.2 million internationally. Analysts had predicted it would add 309,000 and 2.0 million subscribers, respectively. Netflix's sales for the quarter exceeded $2 billion.
The announcement showed that Netflix hasn't reached market saturation yet, and that there's still plenty of room to grow. In late trading, Netflix's share price rose by 20 percent, going even higher in Tuesday morning pre-opening bell trading.
This news comes as Netflix is aggressively boosting its budget for original programming and decreasing its licensed movie library. The company will add 600 hours of original programming this year and over 1,000 hours in 2017.
The earnings report prompted the Wall Street Journal to issue a mea culpa as its investor forecast had been far off base. Prior to the announcement, the WSJ told readers "don't binge on this stock." While Netflix's U.S. subscriber growth is slowing from previous years, it's not slowing as much as analysts thought it would. Overseas subscribers are also growing faster than many thought they would.
Finally, Netflix said it will not expand into China at the moment, citing a challenging regulatory environment.
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