Netflix, Inc. (NFLX) Posts Solid Earnings and Plans to Raise Prices; Stock Soars

The shares of Netflix, Inc. (NASDAQ:NFLX), the largest online video streaming company surged more than 6% to $370.55 per shares during the extended trading hours after reporting strong first quarter financial results and announced its plan to raise prices for its monthly service.

Financial results

Netflix, Inc. (NASDAQ:NFLX) reported $53 million net income or %0.86 earnings per share on $1.06 billion revenue for the first quarter. The online video streaming company beat its earnings guidance of $0.78 per share, and the $0.81 per share consensus estimate of Wall Street analysts based on data compiled by FactSet.

During the quarter, the online video streaming company said the number of its subscribers increased by 4 million to 48.35 million worldwide. Netflix, Inc. (NASDAQ:NFLX) has 35.7 million subscribers in the United States and 12.7 million international subscribers, up by 2.25 million and 1.75 million respectively.  The company ended the period with $8b million free cash flow.

For the second quarter, Netflix, Inc. (NASDAQ:NFLX) expected to deliver $69 million net income or $1.12 earnings per share and approximately $1.13 billion revenue.

Price increase

Netflix, Inc. (NASDAQ:NFLX) announced its plan to raise the prices for its monthly online video streaming service by $1 to $2 for new subscribers worldwide. According to the company, its existing members will continue to pay the current monthly price of $7.99 for two stream or $11.99 for four-stream tier subscription for a generous period.

The company’s CEO Reed Hastings explained that the price increase is necessary to be able to afford a bid against its competitors for programming and to achieve its long-term goal of 60 million to 90 million subscribers in the United States.

Hastings said, “If we want to continue to expand, to do more great original content, more series, more movies, we have to eventually increase prices a little bit.”

Daniel Ernst, an analyst at Hudson Square Research commented, “My guess is they take that money and reinvest it in the business. It’s a good approach to expanding the business.” He added, “I thought for a long time they could raise prices but they’ve always been really disciplined by that. They’ve learned their lessons.”

Equity risk, an equity risk management firm shows that the shares of Netflix, Inc. (NASDAQ:NFLX) are at an elevated risk state. The stock entered its current risk state on March 21 when it went down to $408.50 per share. The firm sent risk alerts to investors that the stock price of the company has a possibility of declining further. Investors who exited their investments save $96.40 per share.


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