A Netflix Unoriginal


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What's going on?

Netflix released its latest financial results on Monday – and it once again added more subscribers than Wall Street expected, helping to drive its stock price up more than 5%.

What does this mean?

In this past quarter, Netflix added close to 2 million US subscribers and about 5.5 million international subscribers – almost a million more than expected. Netflix also increased its prediction for its profit next quarter, which likely contributed to hungry investors boosting its stock price.

The blockbuster (but definitely not Blockbuster) performance is a faithful remake of the final quarter of 2017, which also saw Netflix blowing past investors’ expectations. That has helped the stock rise 60% this year alone [tweet this] (while the whipsawing US stock market overall is currently sitting around where it was on January 1st).

Why should I care?

The bigger picture: Traditional cable companies are being forced to bring Netflix onto their platforms.

If you can’t beat ‘em, join ‘em. Comcast, one of America’s largest cable television companies, will soon offer Netflix as part of its standard bundle. In the near term, this might convince some Comcast customers to refrain from “cutting the cord” (because they can get cable and Netflix from the same source), but it will also likely add to Netflix’s all-important subscriber growth – and perhaps increase the likelihood that those customers eventually do cut to black ‘n’ red.

For markets: The stock price is already reflecting a lot of optimism.

Netflix’s valuation as a company suggests that investors are betting it will both substantially grow its subscriber base and increase the amount it charges each subscriber in the years to come. Netflix also borrows a ton of money to fund its hugely expensive content production (which will total almost $8 billion this year). While Netflix is undoubtedly a revolutionary company, the upside in owning its stock is arguably more limited than it has been in the past – and the risks remain Titanic.

Originally posted as part of the Finimize daily email.

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