Top News Shutterstock Growth worries surrounded Netflix (NFLX) following its earnings report after Tuesday's close, sending the stock down nearly 9% in AH trading. The streamer only added 3.98M paid net subscribers during Q1, short of its guidance for 6M and consensus forecasts of 6.29M. Despite the headlines, Netflix is turning into a cash cow (reporting net income of $1.71B, or $3.75 a share) and is even returning some of that cash to investors via its first stock buyback plan in nearly a decade.
Bigger picture: Netflix has missed its own subscriber forecasts before and the company has repeatedly warned of a slowdown following a pandemic-fueled expansion, but investors were looking for something else. The company projected net adds of just 1M for the second quarter, meaning it would end the first half of the year nearly 6M subscribers short of where the Street projected it would be by that time. Netflix would also require an addition of nearly 21M subscribers in the second half of 2021 to reach analysts' year-end target of 229.4M.
In its quarterly shareholder letter, Netflix blamed part of this year's lag on a "lighter content slate" caused by last year's pandemic-related production shutdowns. For 2021, the streaming giant is splurging another $17B on content and "we'll continue to deliver an amazing range of titles for our members." That includes new seasons of The Witcher and Cobra Kai, and some even expect a new season of the company's blockbuster series Stranger Things in that period as well.
Outlook: Many rivals are coming after Netflix, including Prime Video (AMZN), Disney+ (DIS), HBO Max (T), Peacock (CMCSA) and Paramount+ (VIAC). But the platform still believes the entertainment market is huge and it has plenty of room to grow. It cautions against comparing services on subscriber figures alone - considering the noise of "bundles, discounts and other promotions" - saying instead the focus should be on engagement and revenue as key performance indicators. However, with millions of Americans getting vaccinated and the economy opening up, the question remains whether people will cut back on their streaming subscriptions for other forms of public entertainment. (193 comments)
| Top News Shutterstock Growth worries surrounded Netflix (NFLX) following its earnings report after Tuesday's close, sending the stock down nearly 9% in AH trading. The streamer only added 3.98M paid net subscribers during Q1, short of its guidance for 6M and consensus forecasts of 6.29M. Despite the headlines, Netflix is turning into a cash cow (reporting net income of $1.71B, or $3.75 a share) and is even returning some of that cash to investors via its first stock buyback plan in nearly a decade.
Bigger picture: Netflix has missed its own subscriber forecasts before and the company has repeatedly warned of a slowdown following a pandemic-fueled expansion, but investors were looking for something else. The company projected net adds of just 1M for the second quarter, meaning it would end the first half of the year nearly 6M subscribers short of where the Street projected it would be by that time. Netflix would also require an addition of nearly 21M subscribers in the second half of 2021 to reach analysts' year-end target of 229.4M.
In its quarterly shareholder letter, Netflix blamed part of this year's lag on a "lighter content slate" caused by last year's pandemic-related production shutdowns. For 2021, the streaming giant is splurging another $17B on content and "we'll continue to deliver an amazing range of titles for our members." That includes new seasons of The Witcher and Cobra Kai, and some even expect a new season of the company's blockbuster series Stranger Things in that period as well.
Outlook: Many rivals are coming after Netflix, including Prime Video (AMZN), Disney+ (DIS), HBO Max (T), Peacock (CMCSA) and Paramount+ (VIAC). But the platform still believes the entertainment market is huge and it has plenty of room to grow. It cautions against comparing services on subscriber figures alone - considering the noise of "bundles, discounts and other promotions" - saying instead the focus should be on engagement and revenue as key performance indicators. However, with millions of Americans getting vaccinated and the economy opening up, the question remains whether people will cut back on their streaming subscriptions for other forms of public entertainment. (193 comments)
| | Stocks Wall Street notched its first back-to-back decline since late March on Tuesday as a number of factors disrupted the bullish mood seen last week. The declines came during what was forecast to be a bumper earnings season, but sky-high valuations and the lack of catalysts to improve upon lofty expectations may prove to be a stumbling block. "With stock markets, it is often better to travel than to arrive," said Trevor Greetham, investment strategist at Royal London.
Other concerns are weighing on the market as well, but in this investing atmosphere, those could go away as soon as they come. Dow and S&P 500 futures inched down 0.1% overnight, while contracts linked to the Nasdaq dipped 0.3%.
COVID-19 - Coronavirus cases are soaring across the globe, with a new variant pummeling India with a devastating second wave. That had reopening plays lead the market lower as the State Department said it would increase "do not travel" advisories to 80% of the world's countries. Some health experts have also suggested that herd immunity may be off the table and are rather talking about control.
Inflation - Pricing pressures were already been seen in the market last week, with the biggest monthly rise in the consumer price index since 2012. Consumer giants have since come out and said they'll have to raise prices because of higher commodity and input costs. The latest to boost price tags are Procter & Gamble (PG) and Coca-Cola (KO), which unveiled the increases this week along with their Q1 results.
Yields - The rate on the 10-year Treasury crept up another 2 bps overnight to 1.58% and even touched 1.6% on Monday. Traders will keep an eye on an auction today for $24B of 20-year bonds, as a gauge of demand for longer-term government debt. Another $35B auction will be held for 119-day bills. |
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