Business World

Wednesday 21 February 2018

Netflix shares surge to record high after company forecasts customer growth

Shares in Netflix increase
Shares in Netflix increase

Shares in Netflix, the world's largest subscription TV streaming service, surged to a record high after the company forecast customer growth that topped analysts' estimates and saying it may charge new users more to share accounts.

Netflix forecast that it will add 2.25 million new domestic subscribers this quarter, according to a statement on its website. The California-based company predicted first-quarter profit of $48m (€35m), or 78 cents a share, compared with analysts' projections of 75 cents.

The shares rose 16pc to $385.62 at 11.25 am in New York after reaching a record $395.63 intraday. The stock had the biggest gain in the Standard & Poor's 500 Index last year.

Chief Executive Officer Reed Hastings is testing new pricing strategies that would increase revenue and profit, and investing in growth to keep the firm ahead of competitors HBO, Inc. and Hulu LLC.

A price increase in Ireland suggests Netflix can follow suit at home without triggering a customer revolt like the one that cost it subscribers in 2011.

"Management appears more confident than at any time in their history," said Michael Pachter, an analyst with Wedbush Securities in Los Angeles who has a sell rating on the stock.

"It's either a sign that things are really great or that they're starting to believe their own hype." Hastings has resisted calls to raise prices by investors who cite the company's programming obligations, which now stand at $7.3 billion.

Now Netflix is considering tiered alternatives to its $7.99-a-month online subscription, including an $11.99 option for customers who share their accounts with friends and family.

In December, the company offered some new customers a $6.99 starting plan that limited viewing to one screen at a time.

"Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone's taste," Hastings said yesterday in a letter to investors.

The company may follow the model of a recent price increase in Ireland, where current users were told they would not see price increases for two years, he said.

With Netflix's US subscriber base topping that of Time Warner Inc.'s HBO, investors are trying to gauge how big the company can be. Total online subscribers grew to 44.4 million worldwide in the fourth quarter, including 41.4 million paid. (Bloomberg)

Irish Independent

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