To what extent can Netflix (NFLX) fight off threats from emerging streaming platforms from media titans Disney (DIS) and Comcast (CMCSA) asset NBCUniversal?
Netflix is set to report first quarter fiscal 2019 financial results Tuesday after the closing bell. As is often the case, Netflix’s Q1 results will be the first among its FAANG peers — Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG , GOOGL), to be released and could set the tone for what the group is expected to do. For Netflix, however, the company will be asked to respond amid the recent unveiling of Disney’s streaming platform.
Disney last week finally announced details about its upcoming streaming service, dubbed Disney+. The service, which will cost $6.99 per month, or $69.99 for an annual plan, is expected to be ready on Nov. 12, delivering a combination of original content and offerings from Disney's extensive libraries as well as content it now owns via its Fox acquisition. Analysts remain positive that Netflix’s first-mover advantage won’t disrupt its long-term growth story.
This is especially after Netflix has recently raised prices for its subscriptions in the U.S., raising the price of both its basic and standard plans by $1, while its premium offering was increased by $2. Netflix believes it has made the necessary investments in original content (both movies and TV shows) to maintain its status the streaming movie leader. On Tuesday it can allay competitive concerns by delivering solid subscriber additions for both domestic and international markets and upbeat guidance.
For the quarter that ended March, Wall Street expects Netflix to earn 57 cents per share on revenue of $4.5 billion. This compares to the year-ago quarter when earning were 64 cents per share on $3.7 billion in revenue. For the full year, ending in December, earnings are projected to rise 51% to $4.05 per share, while full-year revenue of $20.21 billion would mark an increase of 28% year over year.
Netflix shares have risen more than 30% year to date, despite expectations of a conservative quarter. This is because the company added 30 million net new subscribers in 2018, thanks to its international push, and it is expected to add at least another 30 million this year. For the just-ended quarter, Wall Street expects the company to add global subscriber additions of 8.94 billion. And it is expected to outline plans to secure and maintain its massive slice of that market.
The good news is the rapidly growing movie streaming market is expected to gain steam in the years ahead, growing at a compound annual growth rate of 20% from 2018 to 2025 and reach $124.57 billion by 2025, according to Grand View Research. This is especially notable since average revenue per user is expected to rise from $91.37 in 2019 to $98.64 by 2023, according to Statista.
All told, the company’s aggressive investment in original content is paying off as evidenced by its projected growth rate and the fact that it has begun to see increased competition, which further solidifies its working business model. Combined with its recent price hike, which will be used to fund its multibillion-dollar original content plans, Netflix it assured to remain a dominant platform despite these emerging new threats.