Perhaps it shouldn’t be a surprise that a streaming company should do well during a time when people are forced to stay indoors and in need of entertainment. But even by those standards, the rise of the Netflix share price over the last three months has been impressive.

After a brief sell-off at the end of February and beginning of March, shares have gone from strength-to-strength, rising from a low of $290 to a record high close of $548.73. In fact, Netflix’s share price is up 70% year-to-date, with over 50% of that rise having come over the last three months.

Netflix hopes for a repeat of Q1

There were lofty expectations when Netflix reported its Q1 numbers back in April, due to the very high bar set by management in January with a target of 7m new subscribers. The numbers exceeded all the company’s hopes, with 15.8m new users signing up, taking the total to 182.8m. Some of this may be a result of a pull forward from Q2, but are impressive nonetheless.

Profits did fall slightly short of expectations in Q1, which suggests that costs went up significantly over in that period. However, the strength of the US dollar may have played a part in that.

The impact of Covid-19 on the Netflix share price

As Covid-19 took hold around the world and people were confined to their homes, streaming services became a household essential. Netflix was responsible for a number of lockdown must-sees: documentary sensation Tiger King caught the public imagination, Love Is Blind filled the gap left by the postponed Love Island, and Michael Jordan documentary The Last Dance became the ideal substitute as sports were shut down.

The Netflix share price skyrocketed during this period, and as Q2 results will cover much of the time people spent in lockdown, it could be a strong quarter for the on-demand giant, despite the cautious guidance from CEO Reed Hastings.

Some concerns remain

Despite all the strong results, there are still concerns surrounding Netflix’s original content pipeline. Production is currently suspended due to lockdown restrictions. However, this shouldn’t be a problem in the short term. Netflix has the benefit of a well-established content arm, with many shows finished before production halted. Recently-launched rival streaming services may feel the blow of the shutdown more acutely, as they lack the backlog and library Netflix already offers.

Netflix’s most pressing problem now seems to be ensuring that these subscribers stick around once the lockdown is lifted. 

Netflix results a bellwether for the media sector

Netflix expect 7.5m new subscribers for the quarter, although the company have stated that due to the unprecedented global conditions this is “mainly guesswork”. This would take global subscriber numbers to 190m, with results expected to act as a bellwether for the wider streaming market as media companies prepare to release their own results. Profit is expected to come in at $1.814 a share.

Netflix will release its Q2 results on Thursday 16 July. What will the latest numbers mean for the Netflix share price?

 

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CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets 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 we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.