Netflix Q2 2020 Earnings: A Tale of Two Quarters
Jul 17, 2020
On Friday morning, Netflix fell 6% after reporting a strong quarter of subscriber growth that was tempered by a weaker-than-expected outlook.
The company also announced the promotion of content head Ted Sarandos to the position of co-CEO - a move that highlights the importance of strong content investment to Netflix's long-term growth strategy.
We see the stock's move as largely reflective of exuberant investor expectations coming into the print, with the stock hitting new all-time highs just one week prior.
Some of this exuberance was in fact justified, as Netflix's 10 million second quarter net subscriber additions represented their best quarter on that metric ever, and blew past analyst estimates by nearly 2 million.
This was despite having recently completed a campaign that was aimed at cancelling the subscriptions of users who hadn't used the streaming service recently.
However, some of this subscriber strength also seemed to derive from pulled forward demand from the next quarter, as Q3 subscriber guidance came in slightly under 3 million short of analyst expectations.
Netflix's subscriber growth has obviously meaningfully benefitted from the recent increase in leisure time being spent at home across the globe.
As such, we believe a lot of the Q3 guidance may be reflecting heightened conservatism amid uncertain times, which the management team hinted at briefly on the investor call.
Overall, we were pleased with the quarter and remain optimistic on the company's prospects.
Early engagement data from recent subscribers suggest that the latest cohort of users may retain as well or even better than pre-COVID cohorts, which we view as a strong testament to Netflix's long-term growth algorithm.
The more Netflix grows, the more it should be able to invest in its content and user experience, which drives further growth that should keep its flywheel turning for years to come.
Cash Management
© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.
Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at support@titan.com. 508 LaGuardia Place NY, NY 10012.