Please ensure Javascript is enabled for purposes of website accessibility

Why Netflix Stock Rose 40% in the First Half of 2020

By John Ballard – Jul 7, 2020 at 6:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The top streaming platform impressed investors with its subscriber totals last quarter, and expects to keep audiences engaged with more content releases in the near term.

What happened

Shares of Netflix (NFLX 0.13%) climbed 40.6% through the first six months of the year, according to data provided by S&P Global Market Intelligence. The shares initially fell along with the broader market but then shot higher, as investors started to weigh the benefits for digital entertainment providers during the COVID-19 outbreak. 

Netflix reported a huge spike in new subscribers in the first quarter, and despite management's caution that the next few quarters may not be quite as good, investors clearly see this environment as a step change for digital entertainment.

A woman watching streaming video content on a laptop.

Image source: Getty Images.

So what

The first quarter numbers were exceptional. Global streaming paid net additions increased by 15.77 million, an acceleration over the fourth quarter's 8.76 million. Year over year, that represented an increase of 22.8% and helped send revenue up 27.6% over the year-ago quarter. 

Now what

Management cautioned that some of this growth will pull forward subscribers who would have signed up anyway in the next quarter. Also, Netflix will face a difficult year-over-year comparison in the third quarter, given last year's release of new seasons of Money Heist and Stranger Things

Even though COVID-19 has caused some disruption to new production, Netflix is already loaded with new content ready to launch through 2021. In the second quarter, Netflix launched a new comedy, Space Force. And in July, The Last Dance, co-produced with ESPN, will arrive on Netflix.

Netflix is guiding for revenue to grow 22.8% year over year to reach $6 billion in the second quarter. Paid memberships are expected to grow approximately 25.6% to 190.36 million. Overall, Netflix's ability to continue growing at robust rates in a recessionary environment is a large reason why the stock has soared so far this year.

John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$224.36 (0.13%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.