Netflix impresses Wall Street with big overseas growth numbers

Netflix Inc. gave investors just enough good news Wednesday to let them breathe a sigh of relief.

The shares rallied after the company posted slightly better-than-expected subscriber growth overseas in the third quarter, making up for a far smaller gain at home. Earnings also topped Wall Street estimates, helping investors look past a tepid forecast for the final quarter of the year.

After a disappointing quarter three months ago, investors came in with lower expectations this time around. And Netflix cleared that bar, sending the shares up as much as 11% in late trading.

“We’re making strides in our key markets and, while we have much more work to do in Asia in the coming years, we are seeing encouraging signs of progress,” Netflix said in a letter to shareholders.

The world’s largest paid online TV network signed up 6.3 million new users outside the U.S., beating forecasts.

Even though domestic subscriptions missed analysts’ estimates, they at least rebounded from a decline in the previous quarter. Netflix expects to sign 7 million more international customers during the current three months.

International markets account for almost all of Netflix’s growth – and most of its total customers. Gains in the U.S. last quarter amounted to just 520,000 new accounts. A new season of “La Casa de Papel,” a Spanish heist series, boosted interest abroad, especially in Latin America and Europe.

“Stranger Things,” meanwhile, was viewed by 64 million people in its first four weeks, the most-watched series to date. The teen science-fiction show, now in its third season, is the service’s biggest hit at home.

Netflix expects to add a total of 7.6 million more customers in the fourth quarter – fewer than analysts expected. While the final three months of the year are typically among the strongest, the company will face new competition from the Disney+ and Apple TV+ streaming services.

“The launch of these new services will be noisy,” Netflix said in its letter. “There may be some modest headwind to our near-term growth, and we have tried to factor that into our guidance.”

Netflix shares rose as high as $318.79 in extended trading. The stock has taken a beating since July, dropping 21% since last quarter’s miss. It closed at $286.28 in regular trading on Wednesday.

U.S. Woes

Third-quarter revenue grew 31% to $5.24 billion, just shy of Wall Street projections. Profit increased to $1.47 a share, easily beating analysts’ estimates of $1.05.

This quarter, the company forecasts profit of 51 cents a share on revenue of $5.44 billion. Both are below Wall Street estimates.

In the U.S., there wasn’t much to cheer about. The company is going to post its weakest growth at home in years, adding just 2.7 million customers this year. A recent price increase contributed to the slowdown, Netflix said.

“In the long term, though, we expect we’ll continue to grow nicely,” Netflix said, “given the strength of our service and the large market opportunity.”