Today's stock market
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Tech stocks led the market, with the Technology Select Sector SPDR ETF (XLK -1.92%) rising 1.9%. The financial sector didn't join in the party despite decent earnings from Goldman Sachs, likely because of a flattening yield curve. The SPDR S&P Regional Banking ETF (KRE -0.39%) closed down 1.3%.
Two companies leading the cord-cutting revolution were in the news today. Netflix (NFLX -1.78%) reported strong financial results and better-than-expected subscriber growth, while Roku (ROKU -0.67%) announced the availability of ESPN Plus on its platform.
Netflix reports another blockbuster quarter
Netflix stock soared 9.2% after the streaming pioneer reported another excellent quarter of subscriber and profit growth that beat its forecast. Revenue grew 40.4% to $3.7 billion on the addition of 7.41 million new subscribers. Earnings per share came in at $0.64 on a 63% increase in net income to $290 million. The company had forecast income of $282 million, 6.35 million subscriber additions, and revenue of $3.69 billion.
Revenue growth was fueled by a 25% increase in paid memberships and a 14% jump in average subscription price. The company's international business continues to boom, with 5.46 million new subscribers outside the U.S. added in the quarter. The international segment now accounts for 50% of revenue and 55% of memberships. The U.S. business continues to grow as well, with Netflix adding 1.96 million memberships despite a price increase. Operating margin ballooned to 12.1%, compared with 7.5% last quarter and 9.7% in the quarter a year ago.
Looking forward, the company provided guidance for Q2 revenue growth to accelerate to 41.2%, EPS of $0.79 compared to $0.15 a year ago, and net subscriber additions of 6.2 million.
Netflix continues to focus on creating new content, and expects to spend between $7.5 and $8 billion on it 2018, including content shot in international locations for local audiences. The company also expects more bundle deals with service providers, which have lower churn rates and expand awareness.
Investors are over the top for ESPN Plus on Roku
Shares of Roku, maker of streaming media devices, jumped 9% after the company announced the availability of Disney's (DIS -3.20%) newly launched ESPN Plus service on its platform. The streaming sports service will appear in the ESPN channel on the Roku platform and cost $4.99 per month or $49.99 per year. Disney stock gained 1.9% today.
Disney launched the ESPN Plus service last week on its own revamped ESPN app. The service supplements the existing ESPN live channels and will allow users to access "thousands" of additional live events, on-demand content, and original programming not available on ESPN's linear TV or digital networks. The live sports will include a daily, live Major League Baseball game, and a daily National Hockey League game, starting next season. The service will also feature over 250 Major League Soccer games this season, and events from sports such as boxing, golf, tennis, cricket, and rugby.
"Roku customers have enjoyed the ESPN channel for years," said Scott Rosenberg, general manager of the platform business at Roku. "The launch of ESPN [Plus] marks an exciting moment for the [over-the-top] sports experience, giving consumers more sports content from their favorite pastimes than ever."
The move is a logical one for Roku, which is expanding from being simply a device maker to a supplier of a streaming media platform that is embedded in smart TVs and generates revenue for the company from both advertising and content distribution. After the company went public last year and the stock soared initially, shares have languished this year, despite reporting a strong quarter in February.