Netflix just smashed expectations for its 2016 international growth
Netflix has some major expectations to meet, and they include becoming a global entertainment powerhouse.
Whether Netflix could live up to the hype has become a hot topic among investors and analysts, some of whom think Netflix is poised to run into challenges as it tries to grow outside the U.S.
For now, Netflix has been up to the challenge.
Netflix reported on Wednesday that it added another 5.1 million international customers in the last quarter of 2016, and projects another 3.7 in the first quarter of 2017.
Investors were clearly enthused by the results as well as the company’s cherry outlook. Shares in Netflix were up 8% in after hours trading.
Adding to the international growth, Netflix’s once-stagnant U.S. subscriber base added 1.9 million in the fourth quarter and expects to add another 1.5 million next quarter.
Netflix noted in its earnings release that it expects its international operation to be profitable for the first time in the beginning of 2017.
This subscriber growth is essential for Netflix’s future success, particularly as a publicly traded company. Netflix shares trade on a major premium to its current earnings based on expectations about future subscriber additions.
“Netflix’s subscriber numbers must grow in order for the company to justify its share price and valuation,” wrote Investing.com senior analyst Senior Analyst, Clement Thibault in an email. “Netflix provides quarterly guidance on this, but the numbers aren’t reliable.They do, however, set a very clear bar for what is considered failure or a success on this metric.”