Netflix Touts U.S. Growth—and the Market Believes It

April 18, 2017, 12:06 AM UTC

Can Netflix keep adding U.S. subscribers quarter after quarter? The company’s CEO seems to think so, painting a rosy picture of growth even as the streaming service hits 50 million customers and faces stiff competition from Amazon.

“The U.S. market is continuing to grow nicely, even if every incremental 10 million subscribers is harder than the last 10 million,” Reed Hastings said on an video posted to YouTube on Monday afternoon.

The time-delayed video went up two hours after Netflix released its latest quarterly earnings, which beat consensus profit estimates (41 cents versus the predicted 38 cents) but fell slightly short when it came to subscriber growth—the company added a global total of 4.93 million new subscribers versus the 5.2 million it had previously predicted (in the U.S. the figures were 1.42 million versus a predicted 1.5 million).

Since investors value Netflix in large part on future growth, Monday’s slight subscriber hiccup sent the market briefly into sell mode in after hours trading. But the stock soon recovered, presumably once investors digested the finer points of the company’s earnings. Here’s a snapshot of the stock on Monday:


Monday’s stock movement, though, was tame by Netflix standards, unlike the 8% (up) and 16% (down) swings that follow previous earnings results in the last year.

In a letter to investors and in the video, Netflix also dropped other nuggets of good news. These included claims that the much-hyped Dave Chappelle exclusive, which premiered in March, was the “most viewed comedy special ever,” and that subscribers have spent more than half a billion hours “enjoying” specials involving actor Adam Sandler.

Hastings, however, dodged analysts’ questions about how many people are watching the shows, and for how many hours per day. Investors’ have long clamored for this information, believing it would serve as a good metric for audience engagement—much as “time spent on site” is a key indicator for Facebook’s performance.

But Hastings, as he has in the past, would only reply in generalities, this time saying Netflix trails far behind YouTube for views and that the company has “YouTube envy.” The non-answer will likely frustrate investors, though not enough to dump the stock, as today showed.

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Netflix’s letter did acknowledge one apparent flop with viewers. The company noted its original martial arts film Crouching Tiger Hidden Dragon: Sword of Destiny had not been successful.

Meanwhile, the company also downplayed the potential impact of Amazon’s growing footprint in the TV and movie business.

“Home entertainment is not a zero sum game—HBO’s success indicates that,” said Reed, who added that Netflix sees opportunities for expansion in the so-called “faith-based market” with some existing shows.

Reed and other executives also discussed the company’s recent downloading feature (not a big deal) and reiterated a recent statement that Netflix would prefer to make its shows in California than run around the country chasing tax credits.

Finally, the company also suggested it would achieve U.S.-like customer adoption levels overseas, where the company sees a lot of future growth but currently only has only a fraction of the market. Executives also said that Netflix would and would hold its own amid growing competition in other countries.

The bottom line is Netflix continues to face high expectations but, for now at least, investors have faith it will meet them.

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