April 15, 2020
At a time when media and entertainment companies struggle to sustain operations due to the coronavirus pandemic, SVOD juggernaut Netflix appears to be riding high, getting repeated praise on Wall Street. The result is an escalating stock price and valuation that topped The Walt Disney Company at the close of trading on April 15.
Netflix shares closed at a record high of $426.75 per share, topping the previous high of $418.97 per share on July 9, 2018.
Why all the investor love? Netflix’s business model appears to be marginally affected thus far by the coronavirus pandemic. While its content production remains shuttered along with the rest of Hollywood, Netflix was one of the first media companies to create a relief fund ($100 million) to assist production personnel and related staff on its original content sidelined without pay during the shutdown.
Analysts contend Netflix subscriber growth has been robust as millions of people (especially in Europe) have been forced to quarantine in their homes. Subscriber growth estimates range from more than 7.5 million to 9.5 million worldwide.
Netflix has also scored big with viewers for its new reality-based true crime documentary miniseries “Tiger King,” about the life of bizarre zookeeper Joe Exotic.
“We believe the unfortunate COVID-19 situation is cementing Netflix’s global dominance partly driven by the incremental content spend that is enabled by their massive and growing subscriber base,” Jeffrey Wlodarczak, analyst with Pivotal Research Group, wrote in an April 15 note.
Even longtime Netflix bear Michael Pachter with Wedbush Securities in Los Angeles is giving the streamer a short leash, raising his stock price to $194 per share from $173. But Pachter warns Netflix’s place in the sun during a storm could be short.
He argues Netflix’s long-running excessive cash burn will eventually haunt the service and production shutdowns due to the pandemic could result in higher subscriber churn when the original content portfolio runs dry.
Netflix reports first-quarter (ended March 31) fiscal results on April 21.