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Netflix shares pop as it hits 125 million subscribers

Hannah Boland
Netflix hiked prices for most of its customers late last year - AP

Netflix's share price surge showed no sign of letting up this evening, after it revealed a further seven million people had signed up to its streaming service in the first three months of 2018, breezing past already-lofty expectations. 

Netflix has seen its share price rocket in the year-to-date, up more than 60pc at the close of play on Monday, prompting some concern that it could be in for a heavy fall, should the results disappoint. 

However, Netflix ticked up more than 8pc after the close today,  taking its value above $140bn (£97bn) in after-hours trading, as it said more people continued to sign up to its service.

It now has 125 million subscribers globally – a number which has continued to grow despite it having hiked prices for most of its customers late last year. 

Chiam Siegel, an analyst at Elazar Advisors, said: “I don’t think this is a one-time thing. It’s very similar to the results we saw last quarter. It’s getting better.”

The bulk of the subscriber growth in the three months to the end of March came from its international segment, where it added 5.46 million subscribers, compared to a market forecast of 4.9 million.

In the US, it signed up 1.96 million more viewers in the three month period, ahead of the 1.45 million forecast. 

This, combined with the 14pc rise in average selling price of its memberships, pushed its revenue up 40pc year on year, to $3.7bn. 

Netflix international expansion

The group said it will spend between $7.5bn to $8bn on content this year, which is forecast to drive its subscriber numbers even higher, by 6.2 million for the second quarter, but will also mean its debt pile will continue to grow. 

"We will continue to raise debt as needed to fund our increase in original content," Netflix said. 

Credit agency Moody's recently upgraded its rating on Netflix's debt, saying "the steady subscriber growth, together with gradual price increases will outpace the increasing investment in content and the upfront working capital spending on self-produced and owned programming, resulting in steadily improving margins".

"We believe that those margins will need to grow from the 7pc range of 2017, to the low to mid 20pc range to generate positive cash flows. As a result, we forecast the company becoming cash flow positive in approximately five years."