The timing of pushing the House of Cards to the next quarter has played a major rule in its profit outlook for this quarter.
Riding on positive signs of its surge to expand its digital footprint, Netflix Inc has made a bullish forecast for subscriber additions by mid-year which has sent its shares shooting to an all-time high.
The streaming video company has pushed back the next season of its hit “House of Cards,” as well as other programing to the second quarter, which means it has managed to capture fewer new subscribers in the first quarter than it had hoped. It hopes to tally the difference by the next quarter.
Subscription rolls are the key indicators of Netflix’s growth and in the first quarter they have risen by just under 5 million globally. This figure lags behind analysts’ projection of 5.18 million, as per FactSet StreetAccount.
Nevertheless, Netflix has forecast 3.2 million more in the seasonally slow second quarter, which is well ahead of analysts’ expectation of 2.4 million.
After a decade of shaking up traditional video media in Hollywood, the video streaming company’s TV and movie shows over the internet are set to reach the milestone of 100 million global subscribers this weekend.
Reed Hastings, Netflix’s Chief Executive has urged investors to look at its growth projection over time rather than by quarterly fluctuations.
“We definitely see a big opportunity around the world,” said Hastings in an interview with analysts that was posted on YouTube.
In its quarterly letter to shareholders, Netflix has urged investors to judge its future success by looking primarily at revenue growth and global operating margins.
For Wall Street this is a significant shift since traditionally it has always focused on subscriber numbers, said Laura Martin, an analyst at Needham & Co.
“The minute you actually pivot (investors) to an income statement, you’re talking to a completely different kind of investor. And that investor demands profitability. So it’s a risky business,” said Martin said.
Netflix’s net income has risen to $178 million, which amounts to 40 cents per share, compared to $28 million, or 6 cents per share, a year ago. Analysts had forecast 37 cents a share.
The upbeat earnings were primarily due to the change in timing of the “House of Cards,” which helped push costs into the second quarter thus boosting operating margins for the quarter of January to March.