Utterly exceeding analysts’ expectations, the media streaming giant Netflix experienced a massive growth of online subscriptions in the third quarter of 2018. Although analysts from Morgan Stanley, Goldman Sachs, and Raymond James cut their price targets on Netflix ahead of its earnings report, the company has expanded its services as streaming revenues have also increased by 36% when compared to last year’s third quarter report. The statistics indicate that Netflix will continue its status as one of the highest performing stocks in the Wall Street Stock Exchange, especially considering the 80% increase of stock value from last year.
Netflix maintains its strong performance by riding the trend wave of digital streaming television. As the company expands, Netflix might become a threat for any cable or satellite companies. Customers have now begun the shift from conventional TV providers into online based services. E-marketer projects more than 60% of the U.S. population will be using streaming applications such as YouTube, Netflix, and Hulu, by the end of the year.
Netflix has their own way to compete with any cable or satellite companies by offering customers thousands of programs on-demand for a monthly fee. Furthermore, Netflix invests billions in their original shows as they are having a better payback in terms of people watching and valuing their subscription. As a result, the number of people paying for traditional cable or satellite companies has declined and caused media companies to merge. In order to compete with Netflix, media companies such as Disney and AT&T Inc., the parent of Warner Bros and HBO, have created their strategy in collaboration to build their own service for consumers that is worth $160 billion.
In the third quarter, the additional number of Netflix’s United States and international subscribers have increased by almost 2 million than the last quarter. The additional number of subscribers has helped lift profit more than threefold to US$ 89 cents a share, exceeding the analyst’s estimated in which US$ 68 cents a share. As it begins the fourth quarter in January 2019, Netflix will only give guidance to only its paid membership subscription and no longer include free trial membership in its total net additions. “Paid net ads are a more reliable indicator of revenue growth,” Netflix added.
Sources: Bloomberg CNBC
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