Netflix's big bet on original shows finally seen paying off

Tue Oct 18, 2016 12:15pm EDT
 
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By Tenzin Pema

(Reuters) - Netflix Inc's shares jumped as much as 20 percent on Tuesday, after the company added 50 percent more subscribers than expected in the third quarter.

At least 10 brokerages, including Goldman Sachs and RBC Capital Markets, raised their price targets on the stock, praising the company's focus on developing original content.

Netflix's shares were up 18.6 percent at $118.23 in early trading, adding about $8 billion to the company's market value.

The video streaming company also said it was getting ready to spend $6 billion on content next year, up $1 billion from 2016.

"The benefits of NFLX-produced original content including attractive economics and greater control are clear and we believe returns on original spend are high," J.P. Morgan Securities analyst Doug Anmuth said in a research note.

Strong subscriber additions, after disappointing growth in the previous quarter, helped Netflix post a 31.7 percent jump in third-quarter revenue.

Anmuth said he believed Netflix was on track toward 60 million plus subscribers in the United States and about 100 million internationally by 2020.

The company has often been criticized for spending too much on content as it tries to aggressively gain subscribers outside the United States, its main market.   Continued...

 
The Netflix sign on is shown on an iPad in Encinitas, California, April 19,2013. REUTERS/Mike Blake/File Photo