What: Streaming video giant Netflix'sstock leaped 35% higher in April, according to S&P Capital IQ data.
So what: Investors cheered the company's midmonth release of first-quarter earnings results, which included much better than expected revenue and profit growth. But the best news involved subscriber additions: Netflix boosted its membership base by almost 5 million and ended the quarter at 60 million global users.
That improvement added to the company's already impressive growth trajectory. The first quarter's 4.9 million additions stack up well against the 4 million adds Netflix booked in the prior-year period.
The business model also demonstrated its power during the quarter. Contribution margin surged past 30% in the U.S., up from 25% a year earlier. Management still expects to hit a 40% margin in its most mature market in 2020. Meanwhile, the company spent less on marketing during the quarter, which suggests Netflix'sgrowing slate of exclusive content is making it easier to attract new subscribers and retain existing users.
Now what: Management's second-quarter forecast calls for more accelerating growth. Global subscriber additions are expected to hit 2.5 million, compared to 1.7 million a year ago. Netflix appears set to post another year-over-year improvement in net adds -- with 600,000 projected new domestic users this quarter, compared to 570,000 in second-quarter 2014 -- suggesting that saturation in the U.S. market continues to be pushed back.
The popularity of new and exclusive content will be key to Netflix achieving that growth. This quarter's release schedule is even more packed than last quarter's. Highlights include Marvel's Daredevil in April, comedy show Grace and Frankie in May, and action thriller Sense8 from the Wakowskis in June.
The article Why Netflix Inc. Stock Soared 35% in April originally appeared on Fool.com.
Demitrios Kalogeropoulos owns shares of Apple and Netflix. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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