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)
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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