Netflix's Q4 Earnings Gain From Global Subscriber Growth

Netflix’s (NASDAQ:NFLX) fourth-quarter 2017 earnings and revenues breezed past the Zacks Consensus Estimate. The results were driven by a robust increase in subscriber growth in the domestic as well as international market.

At the end of the quarter, Netflix's paid streaming members across the globe increased 24.2% year over year to 110.64 million. The company’s total subscriber base increased 25.4% year over year to 117.58 million.

Netflix’s content strength is evident from the fact that despite a 10% subscription price increase in the United States and Europe, subscriber addition remained unaffected. Rather, paid members in the domestic market increased 10.2% year over year and nearly 3% sequentially. Total subscriber base in the domestic streaming segment increased 10.8% from the year-ago period.

In the International Streaming segment, subscribers increased 41.6% year over year to 62.83 million. Paid members were 57.83 million, up 40.4% from the year-ago quarter. Management noted that India, South East Asia and Japan were the major growth drivers.

Netflix, Inc. Revenue (TTM)

Netflix, Inc. Revenue (TTM) | Netflix, Inc. Quote

Content Portfolio – Key Driver

CEO Reed Hastings considers “word of mouth” to be “the dominant accelerator” that is pulling more people to the platform. He, thus, pledges to “keep doing more incredible content, downloading, easy-to-use, all the things that we’re doing and thus continue to earn the trust and affection of consumers.”

Customer satisfaction is reflected in viewing hours, hours of engagement and subscriber addition. Thus, improvement of content is of utmost importance as this is what differentiates it from other video streaming platforms.

We note that the release of new seasons of popular shows like Stranger Things and The Crown, and original film Bright, starring Will Smith and Joel Edgerton, in the fourth quarter attracted subscribers to the platform.

Netflix’s focus on developing original regional content portfolio has been the key growth driver. The company thus plans to release 30 international original series this year to make the service more appealing to a global audience.

Encouraging Outlook

The company has given a very positive outlook for the first quarter of 2018.

Domestic and international streaming revenues are expected to be $1.807 billion and $1.780 billion, respectively. Total streaming revenues are expected to be $3.587 billion while total revenue, including the DVD business, is anticipated to be $3.686 billion. Management forecasts earnings of 63 cents per share.

Management expects to add 1.45 million subscribers in the domestic streaming segment and 4.90 million subscribers in the international segment.

Paid memberships are expected to be 54.71 million for the domestic segment and 63.78 million for international.

Zacks Rank

Netflix has a Zacks Rank #3 (Hold).

Comtech Telecommunications (NASDAQ:CMTL) , The Trade Desk (NASDAQ:TTD) and Micron Technology (NASDAQ:MU) are some better-ranked stocks in the broader technology sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Comtech, The Trade Desk and Micron Technology is estimated to be 5%, 25% and 10%, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>