Netflix (NFLX) shares rose on Wednesday after the internet television network beat Wall Street’s target for new subscribers in the third quarter.
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Los Gatos, California-based Netflix said late Tuesday that it added 2.4 million new subscribers in the September quarter. Three months ago, Netflix said it expected to add 1 million subscribers during the period. Wall Street analysts are looking for 1.08 million new members. Netflix ended the third quarter with 223.1 million total subscribers worldwide.
The substantial increase in users comes after two consecutive quarters of user declines.
For the quarter, Netflix forecasts to add 4.5 million subscribers. Analysts expect 4.03 million new users in the fourth quarter.
However, with the launch of Netflix’s ad-supported service levels on March 3, the company’s key metric could shift from subscriber additions to average revenue per subscriber, with a scheduled November analyst said.
Netflix stock soars on quarterly beat
Netflix shares rose 13.5% to 273.33 in early stock market trading today. Netflix shares fell 1.7% to close at 240.86 in regular trading on Tuesday.
Netflix earned $3.10 per share on sales of $7.93 billion in the third quarter. Wall Street had forecast Netflix earnings of $2.14 per share on sales of $7.84 billion, according to FactSet. Netflix’s earnings fell 3% from a year earlier, while sales rose 6%.
However, Netflix’s sales and earnings guidance were not reported. For the quarter, Netflix is expected to earn 36 cents a share on sales of $7.78 billion. Analysts had expected Netflix to report fourth-quarter earnings of $1.19 a share on sales of $7.97 billion. In the same period last year, Netflix earned $1.33 per share on sales of $7.71 billion.
“After a challenging first half, we believe we are re-accelerating growth,” Netflix management said in a letter to shareholders.
Netflix touts higher user engagement than rivals Amazon (Amazon), walt disney (DIS) and Hulu.
“Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is difficult,” Netflix said in the letter. “We estimate that they are both losing money, with a combined operating loss of over $10 billion in 2022, compared to Netflix’s annual operating profit of $5 (billion) to $6 billion.”
Netflix Stock Ranks No. 1 in Industry Groups
Netflix attributed its subscriber growth in the third quarter to popular movies and TV shows. New original content includes Season 4 of Stranger Things, Monsters: The Geoffrey Dahmer Story and The Greys.
On Monday, Netflix launched a new tool called “Profile Transfer” for customers who use shared accounts and passwords. The tool will allow people to transfer their profile settings when starting their own paid membership. With it, subscribers can keep their personalized recommendations, viewing history, my list, and other settings.
The new feature comes ahead of Netflix’s plans to crack down on rampant account sharing on the service. The crackdown will take place in early 2023.
According to the IBD Stock Checkup, Netflix stock ranks first among 21 stocks in IBD’s Casual Movies and Related Industry Group. But it has an IBD composite score of 66 out of 99.
Follow Patrick Seitz on Twitter @IBD_PSeitz More coverage on consumer technology, software and semiconductor stocks.
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