A day after publishing its quarterly earnings report, Netflix saw its stock shoot to a new record high. The company’s shares jumped 10% on Tuesday, reaching $338.62 per share. At the end of the day, shares closed at $336.06.This time last year, Netflix stock was trading at around $140.
New subscriptions help stock soar
A surge in subscriptions has fueled Netflix’s sudden spike. In its earnings report, Netflix recorded over 2 million new U.S. users and more than 7.4 million new international users, adding up to a growth increase of 50% from a year ago.
Speaking to CNBC, Michael Graham, managing director and senior equity analyst at Canaccord Genuity, said Netflix still has plenty of room to attract even more subscribers at the international level. “If you look at the penetration that Netflix has in all of the different countries that it’s in, it’s still really early in terms of penetrating those audiences,” he explained. “They’re going to be able to continue to grow the subscriber base.” Graham estimates Netflix will add 70 million new subscribers by the end of 2020.
Netflix burns cash on content
During an interview on Tuesday, Netflix CEO Reed Hastings said the company is looking forward to more growth in the future. In order to reach its goals, Netflix is spending $8 billion on developing new, unique content, and an additional $2 billion marketing. Hastings acknowledged that Netflix has more work to do for it to get more subscribers on board.
“We’re a fraction of the hours of viewing on YouTube. We’re a fraction of the hours of viewing of linear TV. We’ve got some great momentum and we’re very excited about that, but we have a long way to go in terms of earning all the viewing that we want to.”
At yesterday’s close, Netflix’s market cap was $145.8 billion, closely following Disney’s at $153.6 billion and Comcast’s at $154.5 billion. While many analysts have expressed skepticism about Netflix’s stock jump, others see the company’s ambitious plans as a sign that it will continue to reach new milestones in the coming quarters.
