Netflix 3Q numbers - very strong user growth

Netflix reported numbers after hours, the company has certainly kept relevant with the times. They used to be a DVD mail order business. You remember mail? Oh, and you remember what a DVD was too? And I am even guessing that you remember what a Blu-Ray was too? Don't feel too bad if you still buy those things, you are certainly not alone. And you remember dial up internet, the thing that used to ping and twang and make that amazing "handshake" sound? Ha ha, those were the days my friends, when websites had very few images as the internet speeds sucked so bad you couldn't download anything except some text. And a few images here and there. Nowadays we want a pipe into our living room to serve us nothing but the best streaming entertainment. Personally I am a Netflix user, I enjoy the original documentaries. That stuff from Netflix is good, I have watched the "Chef's Table", season one and season three (the French version - not finished yet). World class, for any foodie it is a must watch, plenty fun. Dan Barber and Massimo Bottura were my favourites.

OK, I know you couldn't give a rolling donut what my favourite shows are. We are more interested in the Netflix Q3 numbers. This is the first quarter of more than 2 billion Dollars of revenues. There are now 87.78 million paid subscribers around the world, paid memberships outside of the US has clocked 40 million, growing at a breakneck speed. The company is still making a loss in their international business, it will be about scale in he end, scale and most importantly content. I am a scaredy-cat and I am unlikely to watch Stranger Things (Byron says it is good, Ill take his word for it), and the second season of Narcos, these new shows are being lapped up by the customers.

All of the metrics were ahead of their guidance, net income clocked 52 million Dollars, earnings per share for the quarter was 13 US cents. Operating margins are 5.1 percent, they are interestingly seeing margin expansion, up 90 basis points since this time last year. We were discussing the customer numbers here in the office, the slackening of the US numbers and the ramp up of the international numbers may well be as a result of the crackdown on IP masking. i.e. trying to fool the inter-webs as to where you are coming from, in order to access the full US content. As the content improves in the offshore environment there will be more and more international users. It is an amazing concept. Netflix accounts for around 35 percent of all North American internet traffic. Makes you think, not so?

The biggest risks to a business like Netflix is not being able to deliver the content. It is incredibly easy to quite simply turn the Netflix tap off. Take a break from the service to use one of the competitors. Amazon for instance are spending a lot more on content and have the ability to be able to ramp up more, they certainly have an awful amount of resources over there in JeffBezosVille. The company will continue to attract more and more customers as bandwidth improves across the globe. We continue to be very optimistic about the future of this business, we will have to watch the trends very closely however! We continue to accumulate, the stock has popped sharply post the results, thanks to the comfortable beat.