But Big Hopes for Q2
On Monday, Netflix posted first-quarter earnings that should have – for the most part – made investors happy. Revenue growth met estimates but the number of new subscribers fell below expectations and the same is true for forward earnings guidance.
The main issue is the lack of a major hit such as ‘House of cards that could serve as a new-subscriber magnet and keep current subscribers glued to their screens.
It looks like according to Netflix, the choice for investors is between subscriber growth and profit increase, The company stated that next quarter, as ‘House of cards’ will return to the screens alongside with the introduction of three new, major movies, profit will be strained by release costs, while subscriber growth will improve.
For Netflix, subscriber growth is especially important since subscriber growth isn’t just a number, but a way to pay for soaring expenses – the cost of creating movies and TV shows or licensing programs. Investors could be patience regarding profits while the company is aggressively expanding in terms of new markets, subscribers and the addition of new content, but it’s hard to assess when this patience will run out. On Monday, the company said it intends to raise capital by issuing long-term debt.
Yesterday Netflix rose by over 2.9%, which means an increase of over 18% since the beginning of 2017. Will next quarter stats meet the company’s optimistic projections regarding subscriber growth and what will the profits be like? Stay informed and take advantage of market opportunities as they appear.
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