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22 April 2020

Netflix Results: Covid-19 Benefits Internet Entertainment Companies

Saul Fulda, Investment Analyst, Redmayne Bentley


With global equity markets in disarray, the technology sector has successfully surfed the current wave of uncertainty. Fundamentally, leading tech companies such as Amazon, Microsoft and Facebook are less exposed to the impacts of Covid-19; people are scrolling through Facebook and Instagram more than ever while Microsoft Teams has come to the rescue of businesses adapting to remote working.

Netflix has been the champion in the field. With the recent emergence of fierce competition in the form of Disney+, adding to the already present Amazon Prime Video, talk was around Netflix falling behind. Nothing could be further from the truth. Global lockdowns have propelled Netflix subscriptions, which jumped by 16m in the first three months of 2020, with the group hoping to add a further 7m in the next three months. This sits alongside robust revenue and profit growth, with both factors fusing to support Netflix shares, which have risen by c.34% year-to-date, compared to its Nasdaq index, which has dropped c.7%. 

Netflix’s solid performance illustrates that there is room in the market for multiple winners; Disney’s streaming video service has attracted over 50m paying subscribers in only five months. In a society where people are flooded by choice, consumers are willing and able to subscribe to more than one entertainment service. While a slowdown in subscription growth is inevitable as post-Covid-19 life starts to materialise, this could be a market where everyone’s a winner.  

Please note that investments and income arising from them can fall as well as rise in value and you may lose some or all the amount you have invested. Past performance and forecasts are not reliable indicators of future results or performance. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned. 











 
Netflix Results: Covid-19 Benefits Internet Entertainment Companies
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