Netflix (NFLX) Get Report has soared in the past few weeks by more than 40 percent. Investors are hoping the company can show that given a global recession and the arrival of strong competition, Netflix will still be able to direct revenue growth rates of about 30 percent and retain high user growth figures for the quarter ahead.
Here are why investors would do well to avoid this stock for now.
Q1 2020 Results: What to Look For
The specifics of Netflix’s guidelines may have huge consequences. Here two distinct and opposing dynamics are at play. On the one hand, on the basis of the theory that Netflix will be a major beneficiary from the current stay-at-home setting. There are massive expectations factored into Netflix’s share price. Its shares soaring 40 percent since the lows set in March.
On the other hand, two major risk factors are at play: the willingness of Netflix to increase rates amid a global slowdown. And also, the first full quarter with Disney on the scene.
Breaking Down Netflix’s Revenues
Netflix produces about 45 per cent of all U.S. sales. Recently, the domestic success of Netflix has been driven largely by price rises, rather than substantial rises in paying membership.
Specifically, in Q4 2018, Netflix managed to increase its prices by about 17 percent relative to the same time a year earlier. Meanwhile, its paying net adds trended down across 2019.
On the other hand, Netflix’s has had no trouble rising the international numbers of paying subscribers. Nevertheless, the willingness of Netflix to lift rates globally has been uneven. With unimpressive price rises in Europe, Middle East and Africa and Asia Pacific, balanced by strong price increases of 18 percent in Latin America except FX.
Competition Has Arrived
Disney+ came on the scene in November 2019, meaning that the effects of Q4 2019 for Netflix only slightly impacted Disney’s bid. Disney’s new estimates, however, indicate that Disney+ already has 50 million global subscribers. With some reports predicting that by late June, Disney+ is expected to hit about 70 million global subscribers.
In this case, only eight months after its launch, Disney+ will touch nearly 40 per cent of Netflix’s global paying members.
