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Will Asia-Pacific User Growth Aid Netflix (NFLX) Q2 Earnings?

Netflix NFLX is set to report second-quarter 2020 results on Jul 16.

The company’s international subscriber growth is expected to have been robust in the to-be-reported quarter due to the coronavirus-induced safe distancing and lockdown norms that drove consumption of media content on the Internet.

Further, the launch of low-priced mobile plans in India, Indonesia, Malaysia, Philippines and Thailand is expected to have boosted Netflix’s subscriber strength in Asia-Pacific (APAC).

Netflix’s strong slate of international releases, including fourth season of La Casa de Papel (Money Heist), The King, Valeria and Betaal, is a major driving factor.

Click here to know how the company’s overall Q2 performance is expected to be.

Netflix, Inc. Revenue (TTM)

 

Netflix, Inc. Revenue (TTM)

Netflix, Inc. revenue-ttm | Netflix, Inc. Quote

 

APAC Momentum Expected to Drive Top Line

Courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized, foreign-language content and an expanding international footprint, Netflix has been dominating the streaming space despite the launch of new services like Disney+ from Disney DIS and Apple TV+ from Apple AAPL as well as existing services like Amazon AMZN prime video.

Moreover, robust regional-language content portfolio has helped Netflix improve its competitive position in APAC, Europe, Middle East & Africa (EMEA) and Latin America (LATAM).

Notably, APAC revenues surged 51.3% year over year to $484 million in first-quarter 2020. Moreover, revenues from EMEA and LATAM increased 39.7% and 25.9% to $1.72 billion and $793 million, respectively.

The Zacks Consensus Estimate for APAC revenues is pegged at $554 million, indicating 14.5% growth from the figure reported in the previous quarter.

Moreover, the consensus mark for EMEA revenues stands at $1.86 billion, suggesting 8.1% growth from the figure reported in the previous quarter.

Further, the consensus mark for LATAM revenues are pegged at $821 million, indicating 3.5% growth from the figure reported in the previous quarter.

Will Netflix’s Solid Portfolio Fend Off Coronavirus Headwinds? 

Investors expect the second-quarter earnings call to provide a sneak peek into Netflix’s content plans and spending strategy.

Markedly, Netflix expects viewing and subscriber growth to decline once the coronavirus-related lockdowns and movement restrictions are lifted. The company also expects the halt in content production due to lockdowns to delay releases of new titles, at least by a quarter.

Additionally, Netflix has been spending aggressively to build its original-show portfolio. Moreover, in order to maintain its dominant position, this Zacks Rank #2 (Buy) is spending heavily on marketing activities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This, in turn, is expected to have negatively impacted profitability in the to-be-reported quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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