In the twenty-first century, industry disruption is a common phenomenon. Netflix, the streaming entertainment giant, is a great example of such disruption, as its stock lately has been surging as a result of its impressive subscriber numbers.
Netflix is one of the world’s leading streaming services, boasting millions of subscribers worldwide. Recently, its stock has been surging in response to its subscriber beats.
Netflix recently released its Q4 investor report. While it only managed to meet expectations for total revenue and earnings per share, it exceeded consensus on the important metric of subscriber growth. This has sent its stock surging. In a single day on the 22nd of January 2021, Netflix’s stock rose by nearly 5% or $32.31 per share, while the estimated market yield on its stock is hitting record highs.
Since its inception in 1997, Netflix has gone from a DVD rental delivery service to becoming the leading streaming service provider in less than two decades. Its revenue has grown from $24 million in 2000 to $20.2 billion in 2019. In 2011, the company unveiled its streaming service, which opened up a new frontier of the battle over subscribers in the entertainment industry.
Netflix’s stock has been on an upward trend since the beginning of 2020. The company reported strong Q1 earnings, thereby beating Wall Street estimates. This was mainly attributed to the 2.6 million Netflix users added in the quarter, ending March 2020. This was significantly higher than the expected 0.9 million addition.
The boost in subscriber base was propelled by the novel coronavirus pandemic. As people were locked in their homes, they increasingly subscribed to the streaming services offered by Netflix in order to relieve boredom. Moreover, lockdowns around the world caused people to turn to stream services to watch movies, shows, and other content.
In addition to new subscribers, Netflix also saw an uptick in existing ones. As the pandemic wore on, more people stayed home, resulting in higher engagement with existing subscribers. This further boosted the company’s stock prices.
Analysts expect that, once the pandemic subsides, Netflix's stock prices will remain high. This is because, even in the pre-pandemic period, people were increasingly turning to stream services to watch entertainment content, rather than traditional TV networks. Thus, Netflix’s strong forces have created an ideal environment for long-term growth.
Netflix’s success also extends to its original content. The streaming giant is estimated to have delivered over 197 original titles in 2020, releasing more content than any of its peers. This has drawn a lot of viewer engagement and attention toward the service, propelling its stock to new highs.
In addition to its success in subscription growth, original content, and viewership, analysts also point to other factors contributing to the current surge. These generally include the impact of coronavirus on increasing home-streaming activity, increased competition driving up viewership, and the growing availability of broadband access.
All of these factors seem to be driving the growth of Netflix’s stock while gaining international traction. As of January 2021, analysts have been expecting the stock to break above $500 per share in the near future. However, whether the current surge will sustain or not is hard to predict in the longer term.
Overall, it is clear that Netflix stock is surging due to the increase in its subscriber base. The company’s streaming service has proven its mettle in the entertainment industry, and even after the pandemic subsides, its stock prices are expected to remain high. As such, Netflix is set to continue its domination of the streaming industry.
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