Despite the tolls that the COVID-19 pandemic has inflicted on the global economy, Netflix Inc. has nevertheless prospered, enjoying increases in its earnings, revenues, and share prices. Like other on-demand and internet-based services, Netflix stock has soared as consumers continue stay-at-home measures due to the imposition of national lockdowns as a result of the virus’ seemingly endless rampage.
While Netflix’s stock initially did fall during the pandemic-induced market plunge earlier in 2020, it dipped less than the general market overall. Additionally, it rebounded faster than other companies affected by the virus’ impact. Netflix’s total return over the past 12 months was 46.9%. In comparison, it was far above the S&P 500’s total return of only 14.6%. Despite this significant difference, some are skeptical if Netflix can sustain additional growth. However, experts believe that its earnings will rise slowly, thereby maintaining strong revenue growth as seen in prior years. Previously, Netflix posted consistently four years of strong quarterly revenue growth. This growth has ranged between 22.2% to 40.4% for each quarter throughout this period. Experts estimate its growth for Q4 of 2020 will be 21.1%. While this signifies some change, it is the slowest pace of growth for the company in the past 16 quarters. All this will all be addressed when Netflix reports its earnings in January 2021 for Q4.
One key metric to consider when analyzing Netflix’s overall growth is its global streaming paid memberships. Its paid memberships account for international users who have signed up and paid for a subscription to receive their streaming services. This particular figure has increased throughout the pandemic, surging by 27.3%. This amounts to the fastest pace in at least 14 quarters. While analysts estimate that the company’s global streaming paid memberships will continue to grow, they do, however, expect the coming quarter to be markedly slower than earlier ones in 2020.
Overall, if Netflix maintains its core strategy of growing its streaming membership business into a global enterprise, it is sure to keep it as a primary revenue source. However, one must consider that its strategy is challenging amid rising competition from opposing streaming services like Walt Disney Co.’s Disney+, Apple Inc.’s Apple TV+ others.