Will Netflix Stock Continue to Rise?

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 Boosted by an impressive 2nd quarter earnings report released on July 17th, Netflix stock hit an all-time high, exceeding analysts’ expectations.

Wall Street analysts tend to reward or punish Netflix stock according to the company’s subscriber count, rather than its actual earnings.  The streaming giant saw an increase of 5.2 million subscribers, way ahead of Wall Street’s estimates of 3.23 million. The company also beat revenue projections, thanks in part to the return of popular series Orange is the New Black, as well as the release of new seasons for 14 original series, 13 comedies, and 9 feature films.

Netflix earned $2.79 billion in revenue, topping Thomson Reuters’ estimates of $2.76 billion. However, the company’s reported EPS of 15 cents was lower than the 16 cents expected by analysts.

As the U.S. market approaches saturation point, Netflix is now turning its attention to international territories. Rapid global expansion and production of original content is now a priority for the entertainment technology company. The bulk of its user growth is from non-domestic markets (4.14 million new subscribers), driving demand for international content such as Las Chicas del Cable, which targets the Spanish market, and the French-language series Marseilles.

As Amazon, Google, and Apple continue to invest in their own streaming services; competition in the on-demand content space is growing fierce. Netflix might not provide new movies like Amazon’s Instant Video service does, but its prices are more affordable, and its range of content is wider.

Netflix stock went up 10% during aftermarket trading and remains at a near-record high. However, some analysts believe that Netflix’s valuation is inflated, especially considering its increasing competition. While its subscription figures are impressive, the company is spending billions on content every year. It has also increased its debt by 60%, from $2.5 billion in March 2015 to more than $4 billion. To rid itself of debt, Netflix must continue to grow its audience. It has now surpassed the 100 million subscriber mark and the future looks even brighter for the streaming video king.

Traders who are either bullish or bearish on Netflix can use online brokerage services such as UFX‘s stock trading platform. This can help traders take advantage of stock price variations and profit in the long run. Those investing in the markets should always remember to apply sound money management rules to protect investments, especially when opening positions using high leverage.

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