Cathie Wood’s Ark bought the dip in Netflix as disappointing earnings erased $20 billion in the streaming giant’s market cap in just one day

netflix
  • Cathie Wood bought the dip in Netflix on Wednesday as disappointing first quarter earrings weighed on the company’s stock.
  • Wood’s Ark Next Generation Internet ETF and Space ETF added shares of Netflix.
  • Netflix tumbled 8.3% Wednesday after adding fewer subscribers than expected in the first quarter.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Cathie Wood bought the dip in Netflix on Wednesday as disappointing first quarter earrings erased $20 billion from the streaming giant’s market capitalization.

Wood’s Ark Next Generation Internet ETF purchased 53,667 shares of Netflix, bringing the fund’s total holdings of the streaming giant to over $92 million as of Thursday morning.

Wood also added 5,214 shares of Netflix to the Ark Space Exploration and Innovation ETF. The space-focused exchange-traded fund now owns 24,480 shares of Netflix worth over $12 million. The streaming giant has a 1.8% weight in the fund.

On Wednesday Netflix tumbled 8.3% to as low as $503 a share after the company added fewer subscribers than expected last quarter, and warned of further weakness. Shares of the streaming giant continued to slide Thursday, falling 1.6% to as $500.55.

In the first quarter of 2021, Netflix added fewer than 4 million subscribers – less than half the 8.5 million it signed up in the preceding quarter, and a quarter of the almost 16 million it attracted in the first quarter of 2020.

Despite lackluster subscriber growth, Netflix grew revenue by 24% year-on-year to $7.2 billion last quarter, and scored a 140% increase in net income to $1.7 billion.

Netflix is down roughly 7% year-to-date.

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Investors shouldn’t over extrapolate based on Netflix’s disappointing quarter as the shift to streaming is set to continue, LightShed’s Greenfield says

Reed
Reed Hastings, Netflix’s CEO.

  • Netflix stock tumbled as much as 8% on Wednesday after posting disappointing earnings.
  • The streaming giant added just under 4 million subscribers in Q1 versus 15.8 million in the same quarter last year.
  • LightShed Partner’s Rich Greenfield says investors shouldn’t “over extrapolate” based on the poor results.
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Netflix’s disappointing first-quarter results have some investors heading for the exit, but experts say the global shift to streaming is just getting started and the streaming giant will continue to benefit.

LightShed Partner’s Rich Greenfield sat down for an interview with CNBC’s Andrew Sorkin on Wednesday to discuss Netflix’s latest earnings report and its potential effects on the streaming and subscription service ecosystem.

Greenfield said that investors are “over extrapolating” based on Netflix’s disappointing earnings report and that they should recognize the overall trend towards global streaming is still in full swing.

Netflix lost as much as $20 billion of its market cap on Wednesday after the company’s stock plummeted following its earnings release.

Netflix added fewer than 4 million subscribers in the first quarter of 2021, a big drop from the 15.8 million increase it saw a year ago, and more than 2 million less than the 6.25 million new subscribers analysts had anticipated.

The company also guided for just 1 million new subscribers in the upcoming quarter, compared to analysts estimates for 4.8 million.

While the headlines around Netflix’s quarterly results mainly focus on the less than stellar subscription figures, the company did post some positives in its first-quarter release.

The streaming giant revealed it pulled in a profit of $1.71 billion in the quarter compared to just $542.2 million from a year ago. Revenue rose to $7.16 billion from $6.64 billion last year as well.

Greenfield also noted that although Netflix is facing more competition from new streaming services, cord-cutting continues to accelerate.

The analyst said Verizon has dropped 7% of its video subscribers year-over-year and Comcast is talking about losing upwards of 2 million video subscribers in 2020.

He also highlighted the potential for growth in Netflix’s overseas offerings as a big catalyst in the coming years.

“In all of Asia-Pacific, Netflix has 27 million subscribers, it’s a market with hundreds of millions of potential subscribers over time,” Greenfield said.

“So, again, it’s very easy to get caught up in the negativity and being upset about Q1 numbers, the reality is there’s a long way to go and we’re still pretty early in the transition to streaming television,” he added.

Netflix added 1.4 million subscribers across Asia during the first quarter.

The company has been hitting on all cylinders creatively as well, its movies received 36 Oscar nominations this year alone.

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Netflix will gain another 24% from current levels amid ‘structural’ advantages in the streaming space, Argus Research says

Netflix
Netflix.

  • Shares of Netflix jumped as much as 4% on Tuesday after Argus Research upgraded the streaming service to “Buy” from “Hold.”
  • Argus believes Netflix will benefit from “structural competitive advantages” as the firm works to become free cash flow-positive.
  • The firm assigned a $650 price target to Netflix, representing potential upside of 24% from Monday’s close.
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Netflix spiked as much as 4% on Tuesday after the streaming company received an upgrade from Argus Research to “Buy” from “Hold” and a price target of $650, representing potential upside of 24% from Monday’s close.

Argus believes Netflix will benefit from “structural competitive advantages” like being a first mover as it works to become sustainably free cash flow positive in the near future, according to the note. Netflix’s financial goals of buying back stock and becoming more financially lean “may provide a catalyst for Netflix shares,” Argus said.

And while Netflix still trades at a premium relative to its peers, the company’s valuation has improved given the recent sell-off in large cap technology stocks, which provides investors with an “appropriate entry point,” the note said.

One lever Netflix can pull to further monetize its user base is cracking down on password sharing, which various estimates suggest encapsulates anywhere from 25% to 70% of Netflix’s entire global subscriber base of 203 million members, according to Argus.

“Getting those who share account logins who are not members of the same household to sign up for new accounts would boost subscribers and revenue,” Argus explained.

The biggest risk Netflix shareholders face is a pull forward of demand form the COVID-19 pandemic, which will result in tough year-over-year comparables and could lead to increased churn as the virus subsides and people spend less time at home. Increased competition from Disney+ and new entrants also poses a risk to the company, Argus noted.

But Argus believes the subscribers Netflix gained in 2020 “will stick with the service after the pandemic recedes,” adding confidence to its buy rating.

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