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Why Netflix Stock Jumped as Much as 8% to an (Almost) All-Time High

April 17, 2018 12:03 am

Growth at big companies chasing mature markets is supposed to slow down. Think about wireless phones or cable TV. But that rule doesn’t seem to apply to Netflix, at least not yet.

Even after more than 20 years in business, the world’s biggest streaming video service experienced some of its fastest growth ever in the first quarter, helping to give its stock a big lift.

Netflix shares, which hit an all-time high of $333.98 last month before selling off in the recent stock market decline, jumped as much as 8% in after hours trading on Monday. That put the stock price just pennies below the all-time high. But as CEO Reed Hastings and other executives answered an analysts’ questions on one of Netflix’s famously dull quarterly calls for investors, the after hours gain shrunk to a 5% gain to $324.32.

Netflix’s overall revenue increased 40% to $3.7 billion in the quarter, but excluding the aging DVD rental business, streaming video service revenue rose 43% to $3.6 billion, the company’s fastest quarterly growth rate ever, Netflix said. That was due to the combination of adding 7.4 million new subscribers, the most ever for Netflix in a first quarter, plus the price hikes the company pushed through last year, leading to a 14% increase in the average monthly subscription price.

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Investors and analysts were most impressed by the subscriber gains, which came in well ahead of the company’s own forecasts. Netflix added 1.96 million new members in the United States, after forecasting a gain of 1.45 million, and another 5.46 million in other countries, after forecasting 4.9 million. Netflix’s forecasts for the second quarter for subscriber and revenue growth were also better than analysts expected.

“We think investors will likely push NFLX stock higher after this earnings report,” UBS analyst Eric Sheridan wrote after the results came out. “We see investors focused on the widening moat that NFLX is creating with its business (faster subscriber growth on the back of original content push).”

Netflix’s head of programming, Ted Sarandos, did use the call Monday evening to shoot down one frequent rumor about the company, while declining to address another.

“Our move into news has been misreported over and over again and we’re not looking to expand into news beyond the work that we’re doing in short form and long form feature documentaries,” he said, when asked about rumors of a bigger push into news.

Recent talk shows from the likes of David Letterman should be considered entertainment, not news, he stressed. “David Letterman is a great talk show host—not a newscaster,” Sarandos said.

And about those rumors that former president Barack Obama or his wife Michelle is in talks to host such a show?

“I can’t comment on the Obamas or any other deals that would be in various states of negotiation right now,” he replied.

CEO Hastings was also asked whether the data privacy problems hounding Facebook (fb) and other tech companies could hurt Netflix (nflx), particularly if new laws limited data collection. Last week, some members of Congress raised the possibility during hearings in which Facebook CEO Mark Zuckerberg testified about his company’s data collection and data sharing practices.

“Well, I’m very glad that we built the business not to be ad-supported,” he said. “I think we’re substantially inoculated from the other issues that are happening in the industry…Just objectively, we’re much more of a media company in that way than pure tech. Of course we want to be great at both but, again, we’re really pretty different from the pure tech companies.”

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