STREAMING IS SCREAMING!

Many believe that Netflix had a bad EPS or revenue report this quarter, which caused the stock to drop over 35%, but they are wrong! Netflix beat expectations earning an EPS of $3.53 compared to the $2.89 that analysts' have predicted (-5.9% YOY) while also meeting expectations in revenue reaching $7.9 billion. (+10% YOY) What actually caused Netflix's stock to plummet was their reported global paid streaming memberships (how Netflix generates most of its revenue). Analysts expected Netflix to have 224.5 million members but instead only had 221.6 million (suspending service in Russia resulted in a loss of 700k). This was the first time in ten years that Netflix has lost subscribers. Not only that, but they are expected to lose another 2 million subscribers this quarter too! This could have easily been predicted since competition is at ever corner in the streaming realm. Not only is there Youtube, Apple tv, Hulu, Hbo max, Disney +, Peacock, and all those other streaming platforms, but everyone is sharing passwords! (Netflix has recently stated they are focusing on this problem and trying to find a solution) Quarantine was the perfect time for this sector since everyone was at home using technology more than ever, but what comes up must come down (Bill Ackman lost $430 million on a 3-month Netflix bet).

After word got out that Netflix was losing subscribers, investor panicked and fled streaming services such as Spotify, Fubo, Charter Communications and many others drastically. Spotify is the leading the way in the podcast industry in many of the main countries around the world. Not only is Spotify international and still growing, but the podcast industry is also expected to grow in a double digit rate this decade. Spotify alone is down over 20% the last five days even thought there was no specific bad news tied to the company. When you consider Spotify's revenue growth expected in the future (there gross margins of 25% helps as well as their enterprise value to earnings rati, 16, which is the market average) , the recent decline presents an opportunity to enter at a more appetizing price.