Netflix Riding the Tiger -- Heard on the Street
April 21 2020 - 5:29PM
Dow Jones News
By Dan Gallagher
Give Netflix credit for putting the bad news up front. For the
streaming giant's first-quarter results, there was actually very
little of it.
On Monday afternoon, Netflix reported an unprecedented surge in
net new subscribers for the first quarter. Nearly 15.8 million
signed up for the company's streaming service during the period,
which was more than double the seven million additions Netflix had
projected three months ago. The company also projected adding
another 7.5 million new subscribers for the second quarter -- well
ahead of the 5.6 million analysts were expecting, according to
FactSet.
It was a bittersweet win, though, coming during a pandemic that
has confined people to their homes. Streaming entertainment is one
of the few growth markets in such an environment, as evidenced by
strong streaming data reported earlier by Walt Disney Co. and Roku.
But investors hoping for a big number had already bid up Netflix
shares by 34% this year -- the biggest gain by far for any company
on the S&P 500 with a market capitalization exceeding $100
billion.
Netflix's tone wasn't entirely upbeat. In its letter to
shareholders the company said that it expects viewing and
membership growth "to decelerate as home confinement ends, which we
hope is soon." It also noted that its pipeline of new content has
been affected by the shutdown of TV and movie production, with the
silver lining that its cash burn will slow for now. Netflix shares
fell slightly following the results.
Netflix still holds a commanding lead in the streaming market
and is unlikely to be toppled by the raft of new competitors. The
company has also built up a strong library of content and shown a
sharp eye for tapping into the zeitgeist. The docudrama series
"Tiger King" launched in mid-March just as lockdowns sent people
home. That show became water-cooler conversation at a time when no
one could gather around water coolers anymore. Netflix knows all
too well the value of being in the right place at the right
time.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
April 21, 2020 18:14 ET (22:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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