[ad_1]
what happened:
Shares of streaming video giant Netflix (NASDAQ: NFLX) rose 7.9% in afternoon trading after the company reported fourth-quarter results that beat Wall Street’s revenue expectations on strong user growth. Net additions from the previous quarter were 13.1 million, well above expectations of 8.8 million. ARPU was also slightly higher in all regions except Asia Pacific, which drove revenue growth.
Looking to the future, the company is aiming for sales growth of 16% compared to the previous year, excluding the effects of foreign exchange, and this was a solid result. The company also raised its full-year operating margin forecast and provided a better-than-expected EPS forecast. The company’s paid sharing and ad-supported product tiers raised uncertainty about the company’s direction and its fundamentals when they were first announced, but this quarter suggests they may be a great decision by Netflix management. This reassured the market that the technology is highly effective (although it is still in its early stages). . Regarding advertising, the company said: “The expansion of our advertising business represents an opportunity to tap into significant new revenue and profit pools in the medium to long term. “The number has increased by nearly 70%.” We are backed by improvements to our products every quarter. ” Finally, the company struck a bullish tone when talking about the overall competitive landscape, noting that while industry consolidation is expected, the opportunity remains significant. Subtle hints in Netflix’s letter to shareholders that the company has pricing power and may continue to “require members to pay a small additional fee” are based on the value of its product platform, its tenacity. , speaks of innovation.
Overall, it was a strong quarter, showing the company is on track, and the results provide a positive tone for stocks heading into the new earnings season, especially tech stocks. Following the results, Macquarie analyst Tim Nolen raised his rating on the stock from “neutral” to “outperform” and raised his price target from $410 to $595.
Is now the time to buy Netflix? Access the full analysis report here. Free.
What the market is telling us:
Netflix’s stock price has been extremely volatile, with seven price movements of more than 5% over the past year. In that context, today’s moves indicate that the market sees this news as meaningful but not something that will fundamentally change its perception of the business.
The biggest move we wrote about last year was nine months ago, when the company fell 12.5% on news that first-quarter sales were slightly lower than expected. Additionally, next quarter’s sales and operating income are set to be lower than consensus analyst expectations. The company also moved its broader rollout of paid sharing features from late Q1 to Q2 (revenue impact will occur in Q3). The feature is aimed at reducing password sharing, and analysts see this as a potential revenue tailwind.
Netflix has increased 17.3% since the beginning of the year. An investor who bought $1,000 worth of Netflix stock five years ago is now looking at investing $1,683 worth.
Want to know how your favorite stocks are doing? Add them to your StockStory watchlist and you’ll receive timely explanations straight to your inbox every time a covered stock moves by 5% or more. It’s free and takes just a few minutes.
[ad_2]
Source link
