Even a price hike can't slow Netflix down.


Netflix (NFLX) released its first quarter financial results, posting adjusted earnings of $0.64 per share and revenues of $3.7 billion. Netflix shares had climbed 41% over the last 12 weeks but slipped roughly 3% during the last month.


Shares of Netflix were down 1.24% on Monday prior to the release of its first-quarter earnings results, but up 6.2% to $326.98 per share in after-hours trading shortly after its earnings report was released.


NFLX:


Beat earnings estimates. The company posted adjusted earnings of $0.64 per share, just beating Consensus Estimate of 0.63 per share.


Beat revenue estimates. The company saw revenue figures of $3.7 billion, topping our consensus estimate of $3.69 billion.


Netflix’s revenues jumped 40.4% from $2.64 billion in the year-ago period. Meanwhile, the streaming giant’s adjusted Q1 earnings surged from $0.40 per share.


Looking forward to the second quarter, Netflix expects to add 6.2 million new members. The company noted that it is targeting a full-year operating margin between 10% and 11%.


Content is king


Netflix (NFLX) added 7.4 million subscribers in the first three months of 2018, up 50% from the same quarter a year earlier, the company reported on Monday. It now has 125 million subscribers.


The strong subscriber growth came in well ahead of Wall Street's estimates, helping send Netflix stock up 6% in after-hours trading Monday.


Daniel Ives, an analyst with GBH Insights, called Netflix's earnings results "eye-popping" in an investor note.


"It shows the company's aggressive international expansion strategy is bearing fruit and putting major fuel in the company's growth engine for the rest of 2018 and beyond," Ives wrote.


Expectations were high heading into Netflix's earnings report. While several leading tech companies have stumbled this year amid regulatory concerns, Netflix stock has soared 60% on optimism for its original content strategy.


On a conference call with analysts, Netflix executives admitted to being surprised by the company's current level of success.


"We've outperformed the business in a way we didn't predict," David Wells, Netflix's CFO, said on a conference call with analysts Monday. "The business has grown faster than we expected."


Much of that growth is now coming from overseas. The vast majority of the new subscribers last quarter, nearly 5.5 million, came from outside the United States as Netflix continues to gain ground in international markets.


During the first quarter of this year, Netflix launched 18 original series, 11 new seasons for existing original series, and 14 new original movies, according to Michael Pachter, an analyst with Wedbush.


The lineup included a new season of "Jessica Jones," a reboot of "Queer Eye" and the launch of a new talk show from David Letterman, which kicked off with an interview with former President Barack Obama.


 


Netflix expects to have 700 programs available for customers in 2018. But there's at least one area it's not planning to expand into news programs.


"We're not looking to expand into news beyond the work that we're doing in short-form and long-form feature documentary," Ted Sarandos, Netflix's chief content officer, said on the call.


All that original content doesn't come cheap. The company expects to spend as much as $8 billion on shows and movies this year, up from $6 billion in 2017, according to the earnings report.


Netflix has now committed $17.9 billion to streaming content deals, up from $15.3 billion a year earlier. It also reportedly coughed up $300 million to hire Ryan Murphy, the power producer behind "Glee."


To help cover its mounting costs, Netflix hiked prices by 10% in the final quarter of 2017, to $10.99 a month for the standard service. Yet, the company's subscriber growth continues to be trending in the right direction.


Netflix expects to add 6.2 million subscribers in the upcoming quarter, which would also come in above Wall Street estimates.


Still, Netflix continues to face stiff competition. Apple is ramping up its investments in original content. Amazon is rumored to be willing to drop $1 billion on a single TV show. Even Facebook is pushing deeper into video content. (Netflix's CEO Reed Hastings sits on its board).


The belief among analysts like Deutsche Bank's Brian Kraft is that Netflix has too much of a head start to lose now.


"Netflix has changed the industry in a profound way and in doing so has given itself a significant lead, making it very difficult for the traditional media companies or even other big tech companies, to catch up," Kraft wrote last week.


Source: CNN/MONEY & Zacks