Shares of Netflix hit a record high of $US204.38 early Tuesday after the company reported subscriber growth that blew past estimates. Shares have since pared their gains, and are currently up 0.51% at $US203.72.
The company reported a total net add of 5.3 million subscribers in the third quarter, which was above estimates of 4.5 million. It missed slightly on earnings per share, coming in at $US0.29 versus the Wall Street consensus of $US0.32. Revenue beat, coming in at $US2.99 billion versus the $US2.97 billion expected.
Following the results, a number of analysts upgraded their price targets for Netflix, which Goldman Sachs said could happen if the company had a good earnings report. The consensus price target among analysts rose 8.4% to $US217.74 from $US200.85 from before the report, according to data from Bloomberg.
Goldman, which was previously the most bullish firm on Netflix, raised its price target from $US235 to $US250 after the report and remains the most bullish. Oppenheimer raised its price target t0 $US245 from $US215.
“Everything moving in right direction now, but investor anxiety over 2018 cash burn and content competition looms if sub growth slows,” Jason Helfstein, an analyst at Oppenheimer wrote.
Helfstein is referring to the $US7 billion to $US8 billion that Netflix has said it wants to spend on original content in 2018. The company raised its prices for US customers by an average of $US1 recently, which should help with the growing content budgets, though Netflix said the timing of the price increase is not linked with the plan to grow its library.
“Many investors have sort of criticised us in the past for being under-priced, and I think for us, we want to make sure that we do this commensurate with value,” David Wells, CFO of Netflix, said on the company’s earnings call. “And as we take up the content library value as we’re doing more global originals that people have exclusively and only on Netflix, there’s a great association of that value, and we think that we can grow that value and that price slowly and steadily over time.”
Netflix said it hopes to add another 5.05 million subscribers in the fourth quarter, due, in part, to several popular show releases set for the fourth quarter.
Netflix is up 56.87% this year.
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