What happened?

Netflix released its Q1 financial results. Its earnings came out at 76 cents per share versus the consensus EPS forecast of 57 cents, while revenue equaled to $4.52 billion vs. $4.50 billion expected. Moreover, the streaming company added a record 9.6 million new subscribers in the first 3 months of 2019.

Why is it important?

In general

Netflix is entering a more challenging period as other big names like Disney and Apple arrive in the streaming market. The first quarter was strong but traders are not so sure about the upcoming periods.

For investors

Despite the higher Q1 figures, investors weren’t overly positive about the report. The reason is that the company gave a weaker forecast for Q2. In particular, Netflix said that EPS will account for 55 cents, whereas analysts had been talking about 99 cents. This should lead to a considerable downgrade of sentiment as we know that expectations about the future are often more important to the market than the past events. The company also expects that subscriber growth will slow down to 5 million new subscribers in April-June as Netflix is increasing prices in the United States, Brazil, Mexico, and parts of Europe.

The fact that Disney and Apple launch their streaming services this year is indeed a serious problem for Netflix. On the one hand, Netflix is a strong competitor and the size of the entertainment market is big enough to hold several large players. On the other hand, investors will worry about the newcomers, so the general appeal of Netflix stock will be inevitably lower.

For traders

Netflix stock met resistance in the zone of this year’s highs between $370 and $380. A break and a fix above this area are needed to open the way to $400. Support is at the 50-week MA around $340.  

The daily chart of Netflix Inc.
Netflix Inc., daily chart