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Netflix Stock Price Bounce Is Sustainable; Here is Why

How to buy Netflix stocks for beginners | Learbonds

Netflix (NASDAQ: NFLX) stock price surged sharply after reporting substantial growth in revenue and earnings. The strong financial growth has helped in mitigating the impact of lower than expected growth in subscribers.

Netflix stock price currently trades around $286, down significantly from a 52-weeks high of $380 a share.

NFLX Netflix, Inc. daily Stock Chart

The pressure on its share price in the past couple of months was due to traders’ concerns over increasing market competition from Apple (NASDAQ: AAPL) and Disney (NYSE: DIS). NFLX management, however, appears less worried about streaming services from new players.

Strong Results Supports Netflix Stock Price

The company generated third-quarter revenue of $5.25 billion. This represents a growth of 31% from the past year period.

Its revenue grew 35% excluding the negative impact of currency conversions. The revenue growth is driven by 22% growth in average streaming paid memberships and a 9% increase in ARPU year over year.

Netflix Stock Price Bounce...

On the negative side, the company missed subscriber growth targets. Its global streaming paid net adds stood around 6.77M compared to the forecast of 7M subs.

The company believes they are on the right path for diversity, revenue growth, customer engagement, and profitability.

On top, its earnings doubled compared to the earlier year period, thanks to growth in operating margin.

The operating margin grew to 18% from 12% in the year-ago period. Netflix earnings per share stood around $1.47 in the third quarter, up significantly from $0.89 in the same period last year.

The Company Sees Low Competition from Apple and Disney

Netflix stock price plunged sharply amid traders’ concerns over upcoming competition from Apple and Disney.

Fortunately, NFLX management doesn’t give much importance to streaming launches from two new players. The CEO said, “Many are focused on the ‘streaming wars,’ but we’ve been competing with streamers (Amazon, YouTube, Hulu) as well as a linear TV for over a decade.”

Netflix Stock Price Bounce...

Overall, positive financial results would support the NFLX share price in the coming days. The company expects to generate similar results in the final quarter. Some analysts say lower subscriber growth could hinder the upside momentum.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.