Tangled Netflix

Netflix first-quarter results

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What's going on?

A week after Disney unveiled details of its competing video streaming service, Netflix came out swinging on Tuesday with better-than-expected first-quarter results but a worse-than-expected second-quarter forecast (tweet this).

What does this mean?

The aggressively priced Disney Plus doesnt launch until November, giving square-eyed consumers all the more reason to sign up to Netflix in the meantime. Last quarter, the god of the stream added 1.7 million more paying customers in the US and another 7.9 million around the world more than investors predicted.


This quarter, however, Netflix expects to add only 5 million more paying subscribers disappointing investors. If fewer new subscribers arent offset by higher prices, Netflix may deliver even lower revenue and profit than it now expects.

Why should I care?

For markets: Could Netflix fade to black?


Netflixs stock had risen an impressive 30% this year prior to Tuesdays results. But competitors are fine-tuning their own offerings. Apples helping rival streaming services sell subscriptions, while Hulus Monday repurchase of a 10% stake in itself from AT&T (at a Hollywood valuation) may put even more power in the hands of new majority owner Disney. Analysts estimate that Disney Plus will initially have significantly fewer hours of content than Netflix. But as Disney churns out more of its exclusive Marvel, Pixar, and Star Wars content and potentially bundles in Hulu shows to boot customers may eventually change channels.



The bigger picture: Netflix sets the mood… for investors.


Tech stocks still have an outsized role in determining how investors feel about the stock market overall. The communication services sector, which includes Netflix as well as Facebook and Alphabet, represents about 10% of the US stock market almost as influential as major banks, whose quarterly updates have been unconvincing so far. Netflixs fall after releasing results on Tuesday may sink broader market sentiment; but then again, Apple finally reaching a legal settlement with chipmaker Qualcomm over royalty payments sent the latters stock up 23%.

Originally posted as part of the Finimize daily email.

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