Can Netflix pass its subscriber growth test later today?
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Can Netflix pass its subscriber growth test later today?

After-hours this evening, streaming video on demand (SVOD) market leader Netflix will release its second quarter earnings. Expectations are high: Netflix has been a big deal for a long time, but these last few years of exponential growth have firmly solidified its position as a superstar disruptor. In April, the company released an unbelievable first quarter earnings report. And Netflix’s share price has risen by an incredible 106.19% this year. Clearly, the stakes are high, and some analysts are wondering how long the company can continue to trounce ever-increasing expectations.

Netflix’s share price is on a tear so far this year – will it continue?

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Source: Yahoo Finance

The big question – just like it was back in April – is whether the company can add enough subscribers to its streaming platform to keep analysts and investors happy. In the first quarter, it overshot expectations by a cool million – and that beat is, in part, responsible for making Netflix the S&P 500’s second-best performer so far this year. Can it manage a similar feat this time around?

Tim Nollen, a Macquarie analyst, has circulated a note ahead of the figures’ release this evening. He wrote: “it’s possible expectations have gotten ahead of themselves. It may take a solid beat to keep the stock momentum going.”

Netflix’s growth trajectory has become the stuff of legend. Built on the back of award winning original content like Stranger Things and 13 Reasons Why, the platform’s audience growth has resulted in a market cap $12 billion bigger than Disney. Netflix is now officially entertainment royalty – but can it stay there?

Wall Street is looking for another 1.21 million subscribers in the U.S. this quarter, and 5.06 million internationally. This is a huge addition to Netflix’s audience, no doubt, but it’s not a million miles away from Netflix’s own guidance. Last April the SVOD giant said it expected to add 1.2 million domestic subscribers, and 5 million international subscribers, over its second quarter. But can the company jump over such a high bar? We’ll know by tomorrow morning (and, of course, we’ll report the result on this newsfeed). For now, we’ll leave you with the knowledge that even Nollen, who describes expectations leading up to tonight’s reveal as “sky-high”, rates Netflix a “buy”. 

Dominion holds Netflix in its Global Trends Managed Fund.

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