Published: Mon, October 21, 2019
Money | By Ethel Goodwin

Netflix Shares Soar After Earnings, But Will the Gains Last?

Netflix Shares Soar After Earnings, But Will the Gains Last?

The company increased its total paid subscribers by 6.77 million subs during Q3. Just 520,000 of those subscribers were picked up in the US, below the 800,000 that management anticipated.

Shares of Netflix are up almost 10% year to date, but the stock is down nearly 20% since it first missed on subscriber growth in its second quarter three months ago.

Netflix said that it will continue to expand its non-English language original offerings because they help the company increase penetration in global markets.

The subscription service declared its relaxed approach following the release of its third quarter earnings.

The results cheered investors as shares of the streaming giant rose over five per cent in after hours trading.

It is Netflix's final quarterly results before Apple and Disney enter the streaming market, bringing with them competition which has been sorely missing in the video streaming market so far. "There could also be some modest headwind to our near-term development, and we now have tried to issue that into our steering".

In order to compete with Apple+ and Disney+ - which at $4.99 and $6.99 per month, respectively, are both expected to be cheaper servivces - Netflix said it is doubling down on content. Netflix's most popular plan in the United States costs $13 per month. According to the company, this makes the show's third season the most-viewed season of the show. Between July 2019 to September 2019, Netflix added 6.8 million subscribers worldwide, as opposed to 7 million that Netflix anticipated.

Netflix expects to face competition from the Walt Disney Company (NYSE: DIS), which is planning to unveil a streaming service dubbed Disney Plus.

In attempting to explain its poor performance in Q2, Netflix said that it was partly down to not delivering on content over that time, but has made up for it with a string of new releases, notably new series of Stranger Things and Orange Is the New Black. Netflix had a rare U.S. subscriber net loss in Q2 this year after hiking its monthly fees.

"We're incredibly low-cost compared to cable", CEO Reed Hastings said.

On this mobile-only plan, which is considered by the company as a test, chief product officer Greg Peters said that "we've been very, very happy with the mobile plan", and that it is "actually performing better than we tested". Gains in the USA last quarter amounted to just 520 000 new accounts, and the company is going to post its weakest growth at home in years, adding just 2.7 million customers this year.

Recent weeks have seen Netflix, once the fastest growing stock on the Nasdaq, fall behind its more developed peers and direct competition. Disney is yanking its films from Netflix beginning next year.

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