US stock futures are sending mixed signals with S&P 500, Nasdaq and Dow indices almost flat on Wednesday morning. Investors and traders continue to review corporate results in a busy earnings season. While the companies results will reflect on the previous quarter, how much will be the impact of recent Fed rate hikes will be on demand and earnings remains to be seen.
Netflix stock that has collapsed over 60 per cent in the last 1-year is showing renewed momentum. NFLX is higher by over 4 per cent in the pre-market session. The leader in paid streaming TV lost 970,000 subscribers in the Q2, which was less than half what Wall Street feared. The credit perhaps goes to a new season of ‘Stranger Things,’ the Netflix’s most popular English-language series.
Here are excerpts from Netflix earnings results as per the letter to the shareholders:
Q2 was better-than-expected on membership growth, and foreign exchange was worse-than-expected (stronger US dollar), resulting in 9% revenue growth (13% constant currency).
Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience. We’re in a position of strength given our $30 billion-plus in revenue, $6 billion in operating profit last year, growing free cash flow and a strong balance sheet.
Revenue in Q2 grew 9% year over year (or 13% excluding a -$339 million foreign currency impact), driven by a 6% and 2% increase in average paid memberships and ARM , respectively.
In the near term, Netflix’s key priority is to re-accelerate revenue growth and to evolve and improve monetization. In the early days of streaming, Netflix kept the pricing very simple with just one plan level. In 2014, Netflix introduced three price tiers to better segment demand. Going forward, Netflix will focus on better monetizing usage through both continued optimization of pricing and tiering structures as well as the addition of a new, lower-priced ad-supported tier.