Netflix, Banks Headline US Earnings Ramp Up

By Glenn Dyer | More Articles by Glenn Dyer

Netflix shares continued their record rise last week ahead of the release of the streaming video giant’s second-quarter figures on Friday morning, Sydney time.

The shares leapt 8% to close at $US548.73 on Friday, a new record, and valuing the company at $US223.3 billion.

Netflix’s closing price gave it a valuation above those of rivals Walt Disney ($US211.6 billion), Comcast ($US179.7 billion), AT&T ($US210.7 billion). The Murdoch family’s Fox has been left behind with a valuation of just $US14.7 billion.

Netflix shares have risen amid a spate of bullish market research notes in recent days, topped by Goldman Sachs’ prediction of its price reaching $US670 per share.

Netflix shares are up 70% so far in 2020 (15% last week alone), while the broader S&P 500 index is down 1.4%.

When it reports second-quarter results on July 16, Netflix’s subscriber numbers will offer an early look of how COVID-19 continues to redraw the media industry map in the US and globally.

In April, the company topped all estimates for subscriber growth, adding nearly 16 million subscribers globally during the period in the March quarter, to reach almost 183 million.

The quarter only had around six weeks’ impact from the lockdowns introduced in various countries to try and control the COVID-19 pandemic.

The second quarter will cover more of the lockdowns, tempered by re-openings in the US, UK, Europe, and Australia in June.

Netflix’s forecast is for a gain of more than 7 million subscribers, to a total of 190.4 million, though CEO Reed Hastings has described the estimate as “mostly guesswork” due to coronavirus and pandemic factors.

In recent weeks, initially, hard-hit spots like New York and New Jersey made more strides toward full reopening. California, Florida, Texas, and other parts of the U.S. have seen infection rates climb, forcing the closure of some re-opened businesses.

Offshore, Italy, Spain, and the UK have started re-opening as Brazil and India see big spikes in infections and deaths.

Netflix has benefited by not depending on ad revenues for a substantial part of its income – its subscriber fees only, plus payments from a growing number of Pay-TV platforms which have sought protection by offering Netflix on their dashboards (such as Foxtel in Australia).

In its March quarter results, Netflix revealed that it had re-started filming in Iceland and South Korea at a time when Hollywood, Georgia, Texas, the UK, France, India, and New York were or are still shut down.

Later this month, AT&T, Comcast, Fox, and Disney lead the other media groups in reporting their quarterly figures. Companies with pay-TV or streaming businesses will reveal higher viewing (as will the likes of Fox, CBS, and Comcast for NBC) but ad revenues will be down sharply, movie revenues will be close to zero with cinemas shut, theme park revenues will also be close to zero for Disney and Comcast (Universal).

Well-known Wall Street media analyst, Todd Juenger of Bernstein Research rates Netflix stock “outperform” sees a lot of upside on the share price.

“The increased engagement and appreciation for Netflix that a growing number of consumers are experiencing in 2020 could make it that much easier for Netflix to successfully pass through pricing increases in 2021-22,” he wrote in a note to clients last week.

Besides Netflix, the coming week also will see the five big US banks report and set the tone for the non-tech side of the reporting season.

JPMorgan Chase, Citigroup, and Wells Fargo are down to report Tuesday week and Goldman Sachs and Morgan Stanley later this week.

Blackrock, the giant asset manager, is also due to report its quarterly figures.

Microsoft and eBay are also down to report as well and being tech sector leaders, will set the tone for the overall market and the reports the next two weeks from Apple, Alphabet, Facebook, and especially Amazon.

Others down to report include IBM, Honeywell, Pepsi Co, United Airlines, Delta (not last week), Alcoa, Omnicom, Abbott Labs, Alcoa, Domino’s Pizza, and Johnson & Johnson.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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