Netflix beats the Street, says market is big enough to accommodate competitors
Streaming video on demand (SVOD) market leader Netflix reported first-quarter earnings last week that sent the share price down slightly – well, for a day or two, at least. After that, investors came back to their senses and the numbers started going back up again. Why did the company go down? Investors were reacting to the news over Disney’s competitor service, and also a weaker than expected guidance for the second quarter. But strong results and confidence from the company’s top team more than made up for those drags on sentiment.
Netflix’s share price was trending up again by the end of last week: +46% so far this year
Source: Yahoo Finance
So, here’s the financial news: Netflix beat the Street on every metric it reports. Analysts had expected the company to deliver 57c per share for the three-month period – it beat that expectation with ease, reporting 76c per share in earnings. Its beat on revenue was slighter, returning $4.52 billion instead of $4.50 billion. When it came to paid subscriber additions, however, Netflix blew past consensus estimates with ease once more: domestically, the company added 1.74 million (analysts had hoped for 1.61 million), and internationally, it added 7.86 million (analysts had hoped for 7.31 million).
Bar the surprisingly light guidance the company offered for its second-quarter earnings, what caused investors to wobble in the aftermath of such a successful quarter? One major concern for some people is the impact of new streaming services from companies like Disney and Apple. But Netflix seems unconcerned. In its letter to shareholders, the company explained why:
“We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings. We believe there is vast demand for watching great TV and movies and Netflix only satisfies a small portion of that demand.”
If the company’s share price is anything to go by, investors have decided they agree.
Dominion holds Netflix in its Global Trends Ecommerce Fund.
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