Netflix, Inc. (NASDAQ:NFLX) stock soared in after-hours action on Wednesday, after the streaming video company reported vastly higher first-quarter subscriber growth than Wall Street anticipated.
Even though the NFLX stock price was already up 39% year-to-date, the post-earnings rally sent shares soaring above the $530 level, which easily surpasses the stock’s previous all-time highs just below the $490 level.
The rapidly expanding subscriber base — both in the U.S. and abroad — seems to be the core focus of Wall Street. (Earnings per share missed expectations and revenues were in line.)
Net Additions at Home and Abroad
NFLX added a total of 4.88 million streaming subscribers worldwide last quarter, with 2.28 million of those gains coming domestically and the other 2.6 million coming from overseas.
On a percentage basis, the U.S. subscriber base rose 5.9% quarter-over-quarter and 16% year-over-year, clocking in at 41.4 million. NFLX has seen far more rapid expansion internationally, with QoQ subscriber growth of 14.2% and year-over-year growth of nearly 65%. Total international subscribers now number nearly 21 million.
While revenue was in line at $1.57 billion in the first quarter, NFLX earnings missed by a mile, coming in at 39 cents vs. consensus expectations of 69 cents. (Excluding foreign exchange losses, Netflix said earnings would’ve come to 77 cents.)
For Q2, it looks like analysts also were a little overly optimistic: Netflix expects EPS of 26 cents in the second quarter while Wall Street was calling for 90 cents a share.
You wouldn’t know that by looking at the NFLX stock price, of course.
While it’s encouraging to see subscriber growth topping estimates (the 4.9 million additions easily exceeded Netflix’s own 4.1 million estimate), the cost of content is rising meteorically as well.
New viewers were drawn to Netflix in hordes by a highly anticipated new season of House of Cards, as well as a Tina Fey-written comedy series Unbreakable Kimmy Schmidt, and the newly launched drama thriller Bloodline.
Shares also might be more prone to jump on the good news in light of a recently submitted proxy statement, which asks shareholders to allow the company to issue up to 5 billion shares of NFLX stock — a nearly 30-fold increase from the 170 million shares currently approved for issuance.
In other words, there’s a high likelihood that if the amendment is approved, NFLX stock will split — and it’ll probably be a dramatic split. Think somewhere in the 20-to-1 ballpark. That would make shares more affordable for small investors and make NFLX a more likely candidate for price-weighted indices like the Dow Jones Industrial Average.
In the meantime, though, shareholders will have to be content with NFLX stock climbing above the $500 level. I doubt many will mind.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.