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Netflix Beat – Now Chill.

Is this enough to make Tuesday's rally sustainable?

I suppose we’ll have to see how things develop, as it’s always dangerous to jump to conclusions, but Netflix’s earnings beat certainly seems to bode well when it comes to making things “right” in the world after last week’s harrowing bout of volatility.

Earlier on Tuesday, while documenting the extent to which the Growth-to-Value rotation and concurrent Momentum rout was starting to “go global” (as it were), I gently suggested that Netflix’s report could be a make or break moment at a time when everyone is still trying to figure out whether last week was an anomaly or something more serious:

Who knows, maybe Netflix can turn the tide when it reports after the bell on Tuesday.

To be absolutely clear, I don’t care one way or another about Netflix outside of its influence on the broader market and the key role it plays in putting me to sleep every night. This isn’t the forum for single-stock analysis, but occasionally, when the situation calls for it, we’ll mention key company-specific news if it has the potential to shift the broader narrative.

Subscriber growth is obviously key for Netflix and on that score, the company … well … scored. After the bell, Netflix said it expects to add 9.4 million new subscribers in Q4, well ahead of the 7.18 million analysts were looking for. Revenue was inline for Q3 and the bottom line beat ($0.89 versus $0.68 consensus) was sizable.

The shares surged as much as 17% in after hours trading after rising almost 4% during the regular session.

NFLX

(Bloomberg)

QQQ tacked on another 0.6% AH after the Nasdaq 100 logged a monster 3% gain on the day.

QQQ

(Bloomberg) 

Facebook, Google and Amazon all extended gains after hours as well.

Again, anything can happen here and it is entirely possible that some geopolitical tape bomb will spoil the party overnight (especially in light of what’s going on in Saudi Arabia and persistent concerns about the budget standoff between Italy and Brussels), but for the time being, this would appear to presage a continuation of Tuesday’s risk-on sentiment.

What happens on the Nasdaq most assuredly does not stay on the Nasdaq, and when you think about today in the context of Tencent’s ongoing trials and tribulations and the impact that has on Hong Kong and emerging market equities more generally, the Netflix beat and the U.S. tech rally will likely be welcome news. That goes double after last week and against a backdrop where it looked, for a fleeting moment, like the tide might finally be turning in favor of Value over Growth to the detriment of the broader market.


 

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1 comment on “Netflix Beat – Now Chill.

  1. is it 2018 or 1999? “hi Im nflx! i buy new subscribers at a cost of 2yrs+ of revenue, and have no profits, and burn $75million/day in cash. as you can see most investors feel im a good value at infinite times earnings, as they really enjoy the shows I present. there is no way any stock so popular as i can ever go down 90%. so dont worry, everyone knows stocks that go up in price are safe. Oh and please send more cash.”

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