Netflix Implodes After Huge Subscriber Miss, Dismal Guidance

Recent earnings reports from streaming giant Netflix have been a mixed bag: the stock tumbled three quarters ago when the company reported earnings for its first full "post-Corona" quarter and warned that "growth is slowing" before again plunging two quarters ago when the company reported a huge miss in both EPS and new subs, which at 2.2 million was tied for the worst quarter in the past five years, while also reporting a worse than expected outlook for the current quarter. This reversed last quarter when Netflix reported a blowout subscriber beat number and projected it would soon be cash flow positive, sending its stock soaring to an all-time high - if only briefly before again reversing - which brings us to today, when investors are on edge today to find out not whether the company would beat or miss expectations, but rather if Netflix, remains a pandemic-proof company and if the slowdown Reed Hastings warned about is for real and has pulled forward even more subscribers due to covid? After all, Netflix has been warning for months that growth would slow in early 2021 compared to the phenomenal signup rate at the start of the pandemic lockdown last year. And yes, brace for a huge base effect hit: in the first quarter of 2020, the service added 15.8 million new customers, the most in its history, a number which is unlikely to be repeated ever again.

To be sure, despite a series of mediocre earnings, the company has been riding a wave of optimism, its stock soaring in early 2020, putting it in the top 20 for S&P 500 companies, similar to the gains seen by other shutdowns beneficiaries Amazon.com and eBay. Still, after surging to a record high in early July, the stock has traded rangebound, unable to break out to a new high, for the past 10 months. And while there’s no doubt that viewership has surged during the Covid-19 lockdowns in the U.S. and much of the world, there are complications: the virus has brought TV and film production to a halt, a situation that may only get more dire for Netflix as the months wear on. But the biggest question remains how many future subs has covid brought to the present?

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