Netflix adds more subscribers than expected, shares hit record

(Reuters) - Netflix Inc added more subscribers than expected around the world in the third quarter and projected growth in line with Wall Street forecasts, saying it had a head start on rivals as internet television expands globally.

Shares of the world’s leading online video streaming service touched a record high on Monday and rose a further 1.2 percent after hours to $205.07. They are up about 64 percent this year.

For the third quarter, Netflix added 5.3 million subscribers around the world, compared with Wall Street’s target of 4.5 million, according to FactSet. Netflix forecast 6.3 million additions for the current quarter, just above analysts’ average estimate of 6.25 million, which would bring its global customer base to 109 million.

The company known for original TV shows such as “House of Cards” is spending heavily to produce and acquire content as it races to dominate streaming television in international markets, which now account for the majority of its subscriber growth.

In its quarterly letter to shareholders, Netflix said it would boost its content budget to between $7 billion to $8 billion in 2018.

“As we move into 2018, we aim to achieve steady improvement in international profitability and a growing operating margin as our success in many large markets helps fund investments throughout Asia and the rest of the world,” the letter said.

Investors have been bullish on Netflix’s ability to keep signing up customers around the world. Netflix recently traded at 101 times expected earnings for the next 12 months, versus Amazon.com Inc at 144 times earnings and Time Warner Inc at 16 times earnings, according to Thomson Reuters data.

The company faces increasing competition from streaming services such as Amazon.com’s Prime Video, plus moves by traditional media companies. Walt Disney Co decided to yank its movies from Netflix starting in 2019 and start its own online offering.

“While we have multi-year deals in place preventing any sudden reduction in content licensing, the long-term trends are clear. Our future largely lies in exclusive original content,” Netflix said. “We have a good head start but our job is to improve Netflix as rapidly as possible.”

Netflix’s 5.3 million additional subscribers in the third quarter included 4.45 million in international markets and 850,000 in the United States. Wall Street had expected 4.5 million overall; 3.69 million overseas and 810,000 in the United States, according to FactSet.

Revenue rose about 30 percent to $2.99 billion in the third quarter.

The company’s net income rose to $130 million, or 29 cents per share, in the latest quarter from $52 million, or 12 cents per share, a year earlier.