The COVID-19 pandemic forced countries to close borders and keep people indoors. This gave Netflix (NASDAQ:NFLX) viewership a big lift. So when the company reported a cash flow of about $162 million and $5.2 billion in cash, its long-term survival improved greatly.
In the first quarter, Netflix posted GAAP earnings of $1.57 a share as revenue grew an impressive 27.7% Y/Y to $5.77 billion. Paid membership grew 22.8% Y/Y to 182.86 million.
Investors need only worry about when the studio production activity will resume. Still, the company forecasts an additional 7.5 million in net additions in the current (second) quarter. In Q3 and Q4, subscription growth will slow. Investors should expect this because the shutdown will end by then and those who no longer need the service will not continue.
In the last month, NFLX stock rose by 24% and is up 31% year-to-date. The stock is not in value territory so the near-term upside is likely limited. Looking ahead, next quarter will include more of the positive impact of the lockdown on subscriptions. When it releases results, the stock may hold current levels. Similarly, Amazon.com (NASDAQ: AMZN) trades at obscene valuations because the physical store model is shut down. Consumer shave no choice but to shop online.
Investors holding Netflix should continue doing so. The stock is expensive but deserves its premium.
Tech Insider
