Netflix was the brightest star in TV-land even before it knocked Wall Street’s estimates out of the park.
After adding 5.3m new subscribers in just three months – analysts had pencilled in 4.5m – it has become a supernova.
“We think Netflix has reached escape velocity,” gushed Piper Jaffray’s Michael Olson in a research report.
With the shares increasing in value by nearly two thirds in just 12 months, the company passed that threshold a long time ago.
If it meets the current quarter’s forecast of 6.3m new additions, its customer base will top 115.6m.
Next stop the speed of light?
Here’s the problem: Physics states that as an object’s velocity (speed) increases so does its mass, or its resistance to acceleration.
Wall Street physics aren’t all that different. The faster a company grows, the harder it is to keep it up and meet shareholders’ outsized expectations in the process.
That applies even to supernovas like Netflix.
Bear in mind that American capitalism’s obsession with quarterly earnings statements can turn a company from hero to zero in the space of just three months.
All it takes is missing the forecast numbers by a bit.
You can do spectacularly well and still the naysayers will kill you.
That’s why I’m not altogether sure that Netflix boss Reed Hastings will want to thank Mr Olson.
He is doing the right things. While the company is burning cash at quite a rate to support its growth, he’s increasing spending on content.
The guidance for next year had been for that to reach an eye popping $7bn. Now we learn that it could hit $8bn, which might mollify people who were unhappy about its recent price rises.
The company has also started to take a harder line with the shows that it produces.
More than nine in 10 are renewed after the first season, compared to about seven for American network TV.
But those that are are increasingly having to sing for their suppers.
Sci Fi thriller Sense8 is an example of that. It attracted a devoted following, as such shows often do when they’re good. But that following wasn’t big enough to keep the high budget production going past its second season.
There will be twists and turns to come in the Netflix drama. But the show’s long term prospects still look very rosy.
And although Stranger Things have happened, I Sense8 that Netflix’s exalted position at the top of the streaming House of Cards should keep its investors’ Spirt Riding Free even as competitors such as Disney line up to take a run at it.