Among the carnage in the stock market brought on by COVID-19, Netflix has come through as a rare bright spot for investors. The stock has rallied more than 10% from its pre-coronavirus price to a new record high.
Shareholders will learn if their optimism has been well placed when the company releases its latest quarterly financial results on Tuesday in the week ahead. As large parts of the economy have been shutdown to fight the spread of the virus, Netflix is the stay-at-home star.
The company's latest quarter includes March, when Americans and Europeans, the two big audiences for Netflix, were ordered to stay home. Three out of four dollars Netflix collected from subscribers in 2019 came from the U.S. and Europe. Beyond new subscriptions, which are important for growth, investors should focus on how much time subscribers are spending with Netflix.
The company calls this engagement. Yes, that's a 21st Century corporate buzzword, but it leads to revenue gains for the streaming media company. The more time people are relying on Netflix to be entertained, informed or otherwise occupied, the more those subscribers may be willing to absorb a price hike.
The average Netflix subscriber was paying $10.82 per month in 2019. That was only about 50 cents more than a year earlier, but accompanied with subscriber growth, it led to a 29% jump in revenue.
It is a much more competitive field now than even a year ago for the streaming attention of an audience. Disney, Apple and soon AT&T's HBO Max and Comcast's NBC Peacock services have launched. Yet, none have rivaled Netflix in its breadth and consumer loyalty.
For shareholders, that loyalty leads to profits.
