Netflix Q1 Results: Day of Reckoning or Rich Get Richer?

All eyes on Wall Street next week will be focused on Netflix’s first-quarter financial results, which will be released at market close on April 21. At a time of uncertainty, Netflix’s subscriber growth will either validate the market’s enhanced fawning over the SVOD behemoth’s stock or bring it crashing down to earth, the harsh economic reality of the coronavirus even on the perceived virus-proof over-the-top video ecosystem.

Wall Street analysts project Netflix will add upwards of nine million subscribers worldwide, significantly more than the streaming pioneer’s seven million estimate. Scuttlebutt suggests that with shelter-in-place mandates legally enforceable throughout much of Western Europe, people have turned to video streaming in greater numbers for entertainment than before the pandemic.

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Netflix shrewdly took the opportunity to bow true-crime documentary “Tiger King,” an immediate hit with social media water cooler banter, while boasting catalog can’t misses such as “The Office,” among others. The result: a spike in subscriber growth, according to streaming analytics firm Antenna.

“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, wrote in a separate note.

Netflix ended 2019 with 167 million paid subscribers.

Indeed, the echo chamber reverberated surrounding Netflix’s strong position during the pandemic, to point the service’s stock topped Disney, among other media giants.

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Even longtime Netflix bear Michael Pachter, with Wedbush Securities in Los Angeles, expects “moderate upside” to subscriber growth and revenue as social distancing guidelines around the world have “clearly driven” streaming usage, dampened churn and drove incremental sign-ups.

That said, Pachter cautioned that the “most meaningful” stay-at-home mandates globally only began in late February through mid March.

“The timing of COVID-19-related usage and sign-ups late in the quarter, combined with an existing high degree of penetration for Netflix’s domestic addressable market, suggests relatively tempered upside in our view,” Pachter wrote in a note.

Roku Ups Loss, Stock Tumbles

Roku, which co-created the subscription streaming video market with Netflix, Nov. 6 reported a third-quarter (ended Sept. 30) net loss of $25.1 million, widened 164% from a net loss of $9.5 million during the previous-year period.

The company attributed the red ink to increased spending on marketing aimed at attracting user/subscribers.

Revenue increased more than 50% to $261 million from $173.4 million last year. Notable drivers included platform revenue, which increased 79% to $179.3 million compared to $100.1 million last year.

Platform revenue includes The Roku Channel featuring ad-supported programming.

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Roku said active accounts increased by more than 1.7 million to 32.3 million, while streaming hours increased 0.9 billion hours to 10.3 billion. Average revenue per user (ARPU) reached $22.58, up 30% year-over-year. Roku’s monetized video ad impressions more than doubled from the previous-year period. Player revenue increased 11% to $81.6 million from $73.3 million last year.

“We continue to execute well against our long-term strategic plan as the TV market shifts to streaming,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

The executives said Roku’s “business momentum” makes the platform an essential partner for content publishers and advertisers.

“This is evident in the launch of major new streaming services on our platform and by the growth in the number of advertisers who work with Roku,” they wrote.

“We expect platform revenue to represent roughly two-thirds of total revenue including approximately $13 million in revenue from Dataxu,” Wood and Louden wrote.

The company also revised its fiscal 2019 outlook downward, reflecting continued investment in the business as well as an approximate $5 million hit to Q4 pre-tax earnings related to Dataxu-acquisition-related expenses.

Last month,Roku acquired Boston-based Dataxu, an online video ad platform for $150 million in cash and stock.

Wall Street wasn’t impressed, sending Roku shares down more than 14% in after-market trading.

Best Buy Q4 Entertainment Sales Growth Cools, Profit Up

Best Buy Feb. 27 reported a 2.7% increase in fourth quarter (ended Feb. 2) entertainment comparable store sales, which was down from a 16.8% increase during the previous-year period.

The entertainment segment, which includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software, generated 10% ($1.34 billion) of Best Buy’s $13.4 billion in domestic revenue. That compared to $1.39 billion (10%) during the previous-year period.

Internationally, same-store entertainment sales dropped 2.5% compared to a 11% increase last year. Entertainment represented 9% ($117 million) of international revenue, compared to $123 million (9%) last year.

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Overall, the nation’s largest consumer electronics retailer reported $735 million in profit, which was up from $364 million in net income during the previous-year period. Revenue dipped less than 4% to $14.8 billion compared to $15.3 billion last year.

The company generated comparable sales growth across multiple categories, with the largest drivers being wearables, appliances, smart home and gaming. These drivers were partially offset by a decline in the mobile phone category.

Indeed, Best Buy closed 257 branded mobile and 12 large format stores in 2018.

“We are very proud of the financial results we have just delivered,” CEO Hubert Joly said in a statement. “For the fourth quarter, we reported a 3% increase in our comparable sales, on top of 9% comparable sales growth last year. For the full year, our comparable sales grew 4.8% and our [earnings per share] increased more than 20%.”


Amazon Q3 ‘Stores’ Revenue Up 10%

Amazon Oct. 25 reported third-quarter (ended Sept. 30) online store sales of $29 billion, up 10% from sales of $26.3 billion during the previous-year period. Physical store (two locations) sales topped $4.2 million from $1.3 million.

The ecommerce behemoth says online stores revenue includes product sales, physical and digital media, such as books, music, videos, games, and software. This includes digital products sold on a transactional basis such as Amazon Instant Video.

Separately, Amazon said the second season of “NFL Thursday Night Football” on Prime Video reaching more than 8 million combined viewers worldwide through the first four games on Prime Video and Twitch.

Amazon this season added a new alternative audio feed featuring sports journalists Hannah Storm and Andrea Kremer, the first-ever all-female sportscasting team to call NFL games. In addition, Amazon is bringing interactivity to TNF with several innovations, including “X-Ray for TNF” on FireTV, enabling viewers to access live stats, player information, and in-app shopping; as well as the “TNF on Twitch,” affording global users interactive access to watch, comment, and predict game outcomes.

In addition, Prime Video debuted original series “Tom Clancy’s Jack Ryan,” “The Romanoffs,” and season 3 of “The Man in the High Castle.” Upcoming original series include “Homecoming,” a psychological thriller starring Julia Roberts, and produced and directed by Sam Esmail; as well as season 2 of “The Marvelous Mrs. Maisel,” recent winner of eight Emmy awards including Outstanding Comedy Series.