Netflix stock price jumps after hours on 7 million new subscribers

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Some have begun to question, however, whether Netflix's business model is as durable as the share price action suggests, given the huge investments the company has begun to make in its own content, and burgeoning competition.

By Monday of this week, its stock was trading at over 15% less than its $400 level of some months ago, during which time Netflix market cap had overtaken that of Walt Disney.

That paid off in terms of new subscribers. Analysts say that even if Netflix does reach its targeted 5 million new subscribers for Q3, Netflix investors can still expect more conservative growth moving forward.

The company exceeded forecasts in both US and worldwide markets. Most Wall Street analysts parrot the company's projection that it can grow from 130 million customers to 400 million subscribers, if not more. Subscriber growth was stronger than expected in the USA and overseas. It's for that reason investors can put on blinders to the company's financial statements and keep the faith. Management also expects a whopping 9.4 million new customers in the final three months of 2018, likely led by global markets.

On top of that, Netflix is experiencing major growth in emerging markets like India and Brazil.

Netflix has spent almost $7 billion on programming through the first nine months of the year, and plans to boost its investment in the years to come. It's affordable, there aren't any commercial breaks and it has a deep and diverse library of TV shows and movies.

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It has been borrowing heavily to fund its rapid growth, issuing $7.5bn of bonds in less than three years - a strategy that could become more costly in a rising interest environment.

Most analysts blamed Netflix's disappointing second quarter on a light programming slate. The company had previously projected $3 billion to minus $4 billion.

The company, which started out in 1997 as a DVD-by-mail service, plans to spend about $8 billion on original programming this year.

"It'll probably still be the case that they're going to stick to raising debt twice a year", he said. However, despite the unexpected cold shower last quarter, Netflix bulls remain confident the stock will rally.

Analysts estimate that it added about 676 hours of original programming in the U.S. in the most recent quarter, 135% more than in the same period a year earlier.

The Los Gatos, California-based company said revenue jumped 34 percent to $4 billion, matching estimates of Wall Street analysts polled by Refinitiv.

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