What to Watch: Netflix Q1 Earnings
Fiona Cincotta April 15, 2020 12:56 PM
Netflix looks set to be winner from coronavirus outbreak
21st April 2020, after market close.
- EPS $1.62 +113% yoy
- Revenue $5.7 billion +26.1% yoy
Coronavirus. unsurprisingly, will be THE major theme across earnings season. However not all companies will be hurt by these unusual times. Netflix could well be a winner, with an increase in both streaming hours and subscribers as people across the globe stay at home under lock down.
What to watch:
1. Subscriber additions
Q4 saw Netflix add 8.8 million subscribers, 1 million more than forecast, impressive given that both Walt Disney and Apple launched streaming services in the quarter. Expectations are for 7 million new subscribers; the actual figure could be significantly more with reduced subscriber churn.
2. Operating margin
Another key metric that has steadily risen each year. For 2019 full year operating margin was 13%, up from 10% the previous year. Q1 management is forecasting a huge jump to 18%, although full year 2020 is expected to be 16%
Guidance will be more important than ever. How will Netflix guide given that no one really knows how long lock downs will continue for? In Q2 2019 Netflix added 2.7 million subscribers giving weak comparable, plus the fact that lock down is already creeping well in Q2 means there is a good chance that guidance will be strong.
Levels to watch:
Netflix has seen a spectacular recovery from its low of $290 on 17th March. After surging 43% in a month, Netflix is trading just over 1% off its all time high of 423.1 reached in June 2018.
On the downside support can be seen around 393.75/394 and at 363.73 (low 9th April).
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.