Netflix, Inc. (NASDAQ: NFLX) stock made an outstanding rally of over 9.4% on April 17th, 2018 (as of 12:52 PM GMT-4; Source: Google finance) on solid results and forecasts
The group reported a 40% yoy growth in the first quarter of 2018 and expects a 41.2% yoy rise for second quarter of 2018. Twenty five percent rise in average paid streaming memberships and a 14% rise in ASP drove the top line performance. The Operating margin enhanced 12% to 232 bps year over year, which is better than the beginning of quarter guidance, mainly to the timing of content spend. Diluted EPS of $0.64 vs. $0.40 included a $41m non-cash unrealized loss from F/X remeasurement on their Eurobond. Global net adds reached a new Q1-record of 7.41m, which is a rise of 50% year over year and ahead of their 6.35 million forecast.
For the second quarter of 2018, the group forecasts 6.2 million global net additions (1.2m in the US and 5.0m for the international segment) as compared to 5.2 million in the year ago quarter. The second quarter operating margin is expected to be 12% while the group is currently targeting a full year operating margin of 10%-11%. They continue to expect content and marketing spend to be weighted towards the second half of 2018.
The international segment delivered an outstanding performance as Outside of the US, the membership grew by 5.46m surpassing their forecast of 4.9 million. Their international segment currently accounts for 50% of revenue and 55% of memberships. Excluding a F/X impact of +$114 million, international revenue and ASP rose 59% and 13% year over year, respectively. As a result, the Global net adds totaled a new Q1-record of 7.41m, rising 50% year over year and ahead of their 6.35m forecast
Meanwhile, the group’s focus on content is showing in its $7.5-$8 billion of content expense (on a P&L basis) in 2018 across a wide variety of formats (series, films, unscripted, docs, comedy specials, non-English language) to serve the diverse tastes of our growing global membership base.