Netflix shares slip as spending weighs on profits


The Company expects to add another 8.9 million new subscribers the next year quarter, growing 24.6% year over year.

The company earlier this week raised prices for US subscribers from $1 to $2 per month depending on high-definition level and will be phased into all customers this year. Analysts had expected 7.5 million new subscribers while Netflix itself had forecast 7.6 million. Of the 8.8 million paying global subscribers added in the holiday quarter, just 1.5 million were domestic.

Revenue grew 27.4 percent, to $4.19 billion.

Eventually, though, subscriber growth will begin to plateau, which is to say that the company will need to find other ways to boost revenue.

New entrants into the streaming space will likely directly target Netflix users because it would be cheaper to do so than converting a new household.

Netflix added an unprecedented 781 hours of US original programming in the United States during the quarter, according to Cowen & Co analysts, including drama series "Narcos: Mexico" and holiday films such as "The Christmas Chronicles".

Wall Street analysts are becoming more optimistic about Netflix (ticker: NFLX) stock after the company reported higher-than-expected earnings, and beat subscriber expectations. But it seems as though many investors are missing the real story in Netflix's earnings: worldwide subscriber growth.

Netflix, which raised prices for most USA subscribers by $1 to $2 a month earlier this week, said net income fell to $133.9 million, or 30 cents a share, from $185.5 million, or 41 cents, a year earlier.

Spending on original content up front sets the stage for Netflix to profit more from shows or films it owns as time goes on, executives reasoned.

The blitz of original content comes as Disney has stopped supplying new movies to Netflix in order to stock its own streaming service planned for later this year.

Netflix said its cash burn will peak in 2019 and likely drop off in coming years.

Netflix has removed himself so far from his beginning as a sales channel, and now resembles more and more a Hollywood Studio.

As the following chart shows, this week's change marks the fourth price hike to Netflix's standard plan in nine years.

The firm said it will also look to adjust prices elsewhere as currencies fluctuate, but warned the increases could lag behind the exchange rate shifts, causing revenue hiccoughs.

Netflix seems less concerned about the upcoming launch of Walt Disney's subscription service or a similar service from AT&T's WarnerMedia and more focused on the popularity of "Fortnite" the video game. The shares stood at $332.94 heading into Tuesday's trading session.

In its letter to investors, Netflix delivered some details on how well its highly popular "Bird Box" movie performed, saying in its first four weeks the Sandra Bullock horror film reached 80 million households.