Week Ahead Events | Netflix’s 2019 Surge

21 January 2019


Global markets continued to rally on Friday as Wall Street’s major indexes advanced for the fourth consecutive week, with increased hopes the US and China would resolve their trade dispute.

Investor sentiment continued to improve on the back of reports the US and China are prepared to make concessions in trade talks and there has been a shift in tone, as US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan 30. Talks are very much still underway, with no official news yet.

At the same time, the US corporate earnings season is the near-term focus for markets. During company reporting periods, investor attention usually turns back to company profits rather than economic issues etc. We continue to watch developments closely, with Netflix being one of the big names to release quarterly numbers last week.                      


Stock in Focus: Netflix (NFLX:Nasdaq)

Netflix shares have had a very strong start to 2019, up about +27% year to date.

Netflix said it will increase prices for US subscribers by between 13% and 18%, which helped sentiment early last week. While shares did dip slightly on Friday post its result announcement, its shares have been on a strong run. 

Looking at some of the detail, for its fourth quarter, Netflix added 8.8 million paid members sequentially, bringing total members to 139 million by the end of 2018. With paying members up 26% year over year and average subscription prices in its fourth quarter up 3% during this same timeframe, fourth-quarter revenue increased 27% year over year. It will be interesting to see how subscriber numbers grow from here, particularly with increased global competition.

Though the results for the quarter were solid, some investors may have been hoping the company's outlook for negative -$3 billion in 2019 free cash flow to improve following the company's recent price increase announcement. But management continues to expect free cash flow of negative -$3 billion as it spends heavily on content.

Members should look out for our full update on Netflix to be released in this week’s weekly report.


Australia & New Zealand Market Movers

The Australian share market continued its rally on Friday (ASX 200 index +0.50%) as Australian shares extended their gains for a second week on Friday despite investors erring on the side of caution. There is a growing view that the Reserve Bank could be cutting interest rates amid new warnings house prices in Sydney and Melbourne could fall by more than 20 per cent and pull down the national economy.

The New Zealand market was higher in on Friday  (NZX 50 index +0.22%) following Asian markets on renewed hopes for a resolution to the US-China trade tensions. Trading was light with few local drivers, and NZ companies remain quiet ahead of local earning season which beings in February. A2 Milk shares had another solid trading day, helping lift the NZX.


3 Things Markets Will be Watching this Week

  1. US corporate earnings season continues this week.
  2. The Bank of Japan makes a policy decision on Wednesday, and the European Central bank will also make a decision on Thursday.
  3. China releases it 4th quarter economic growth (GDP) numbers on Monday.


Have a Great Day,


Investor sentiment continued to improve on the back of reports the US and China are prepared to make concessions in trade talks and there has been a shift in tone.

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