Report for the IV quarter of 2020 will be published after graduating from January 19; Forecast revenue: $ 6.6 billion; Expected profit per share: $ 1.35.
Last year, Netflix shares (NASDAQ: NFLX) provided an impressive profit to investors. A pandemic locked people around the houses that went to benefit the giant of the streaming market.
Quarantine accelerated the growth of the Netflix platform user base, as people desperately needed entertainment. However, the incredible demand for streaming content has attracted other major players, making the market more closely and thereby putting questioning Netflix growth prospects.
In tomorrow's report of the California Giant For the fourth quarter of 2020, investors will seek evidence that the company is able to protect its leadership in the market and demonstrate the former growth rates.
Nevertheless, despite the strong position of the company, its growth can not continue forever. For the previous quarter (which ended on September 30), the user base of the streaming service increased only 2.2 million subscribers.
The indicator did not significantly reach 3.32 million predicted by analysts, and to a more conservative forecast of the company itself. Netflix believes that for the fourth quarter, the user base has increased by 6 million new subscribers, which is lower than the Wall Street estimate of 6.54 million.
The leadership was already warned that the burst of the first days of the pandemic could not last forever and the indicator will slow down sooner or later. However, a more serious threat to the company is steadily growing rivalry in this segment.
The main competitor is Disney (NYSE: DIS) with its Disney + service, which for the year has passed since the launch, has already managed to attract more than 80 million subscribers. For comparison: as of September, NetFlix user base included 195 million accounts.
The weakness of Netflix shares
The Nielsen Research Company in his report "The Best Films of 2020" reported that 7 of the 10 most popular films last year were available on the Disney + platform launched in November 2019.
According to Nielsen, the market situation has changed somewhat: NetFlix has only 28% of all views (compared with 31% in 2019), and the fraction of Disney + is 6%.
And Disney + is not the only Netflix headache. AT & T (NYSE: T) conducts a large-scale restructuring of WarnerMedia's assets by making an emphasis on the HBO Max streaming broadcast platform. NBCUniversal from Comcast (NASDAQ: CMCSA) is also not lagging behind, putting a new PEACOCK streaming service at the head of the corner.
The weak dynamics of Netflix papers over the past three months and disney shares boom clearly reflect the change in investor preferences.
While Netflix lost about 8% for this period, Disney was able to recover from Martov weakness, adding 39%. On Friday, Netflix shares closed at $ 497.98.
In addition to growing competition, Netflix's positions among other representatives of the FAANF group, the lack of funds are appropriate. Each quarter company invests huge funds in the development of its exclusive shows and international expansion.
To strengthen its monk positions in the last quarter Netflix raised the cost of a subscription to its most popular tariff plan (for the second time in recent years). This step may be counterproductive in conditions of increasing competition and falling income of the population. In the past, the rise in the cost of the subscription led to a slowdown in the growth of the Netflix client base (especially in the usa market).
Summarize
Social distance policies made Netflix shares in one of the leaders of 2020, but as competition increases, some investors began to doubt the stability of the rally. Nevertheless, Netflix still remains far ahead as a coverage of the international market and the scale of the proposed content. Competitors will have to spend a lot of time and effort to reduce the gap in these directions.
In our opinion, on this background, any drawdown of NetFlix shares according to the results of a quarterly publication should be considered as an opportunity for purchase.