Twenty years after Reed Hastings co-founded Netflix Inc, and a decade after the company introduced video streaming, it hit another milestone - one that is key to its ability to sustain its scorching pace of growth. International subscriber count of 52.03 million at the end of the June quarter eclipsed domestic customer numbers of 51.92 million, Netflix said on Monday.
The company's shares were up 10.5 percent at $178.72 in Tuesday premarket trading, on track to add over $7 billion to Netflix's $70 billion market value. Morgan Stanley and JP Morgan - the two brokerages most bullish on Netflix's stock - each raised their price target to $210. "We believe the rapidly growing content offering led by originals that in aggregate garnered 91 Emmy nominations last week, drove the stronger new sign-ups," Morgan Stanley analysts wrote in a research note.
This year, original TV shows "Stranger Things", "The Crown" and the latest season of Kevin Spacey-starrer "House of Cards," received Emmy nominations and brought in more customers than Netflix had predicted for the second quarter. The company, which has over 100 million customers globally, added 4.14 million monthly subscribers in international markets in the latest quarter, handsomely beating the average analyst estimate of 2.59 million, according to data from analytics firm FactSet.
In the United States, it signed up 1.07 million subscribers, compared with analysts' expectations of 631,000. Netflix has often been criticized for spending too much on content as it tries to aggressively gain subscribers outside the United States. The company said earlier it planned to spend about $6 billion this year for original shows and expected to have negative free cash flow of $2 billion to $2.5 billion.
But most analysts backed the company's strategy favoring scale over profit. "The company's content strategy continues to deliver results, and we liken Netflix's apparent mentality around cash flow (spend as much as makes sense within a modest cash burn and leverage framework) to Amazon's mentality around profit," Canaccord Genuity analysts wrote in a broker note.
At least 10 brokerages raised their price targets on Netflix. The median price target is $185. Of the 41 analysts covering Netflix's stock, 24 have a "buy" or higher rating. Fifteen have a "hold" rating and two a "sell" or lower. Netflix's shares had risen about 30 percent this year, upto Monday's close, versus a roughly 10 percent increase in the Nasdaq Composite.