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Netflix stock surge 10% on better than expected earnings amid highly successful original content

The Netflix company logo is seen at NetfNetflix shares surged about 10% in after-market trading yesterday as streaming service reported it attracted more than 40 million global subscribers and tripled profits in the third quarter, beating analysts’ estimates.

The company behind the development of TV series such as “House of Cards” and “Orange Is the New Black” has recovered strongly from its free fall in 2011, when its shares collapsed from $300 to $55 after a re-branding and price rise. Netflix is among the S&P 500’s top performers for the year so far, with its shares rising more than 300%.

Netflix on Monday said it earned 52 cents per share, up from 13 cents a year ago, on revenue totaling $1.106 billion, up from $905 million in the same quarter last year. The results were better than analysts were expecting.

Company CEO Reed Hastings said in a letter to shareholders on Monday that he intends on doubling the investment in original content in 2014, but even after doing so the expenditure will represent less than 10% of Netflixs overall global content expense.

“When we started with original content we didnt have specific data about viewing patterns over time for content that premieres on Netflix,” Mr Hastings wrote. “We decided to use straight line amortization based on our experience with TV series from other networks.”

While gaining on subscribers, Netflix’s original series are also winning it some awards. The streaming service became the first of its kind to win three Emmy awards, including one for Best Director of a Drama Series, given to David Fincher for House of Cards. Those wins showed that the company could compete against cable and broadcast networks in playing the original content game.

For the fourth quarter, Netflix expects between 32.7 and 33.5 million domestic subscribers, or an increase of between 1.6 million and 2.4 million subscribers. Domestic revenue is expected to come in between $731 million and $741 million, while international sales are pegged at between $210 and $224 million. The company expects total earnings of between $29 million and $49 million, or $0.47 to $0.73 per share.

Netflix has been pushed forward by a new generation of viewers who prefer watching movies and series online, rather than sticking to traditional television. “The growth of smart TVs and internet TV devices, such as AppleTV, Roku, and Chromecast, are increasing the availability of TV streaming platforms,” Mr Hastings wrote in his letter. “Tablets and phones also are rapidly growing as Netflix viewing platforms.”

The current consensus among 37 polled by CNN Money investment analysts is to hold stock in Netflix Inc. is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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