The imminent threat of Disney+ from The Walt Disney Company DIS, Apple TV+ from Apple, Inc. AAPL and Peacock from Comcast Corporation CMCSA recently sent Netflix, Inc. NFLX shares on a volatile ride. With the OTT space becoming increasingly saturated, it remained unclear who the streaming winners (and losers) would be in 2020. Fast-forward to April 21, and Netflix proved it’s here to stay. Since setting new lows in March, Netflix’s share price has rallied nearly 40%. The company has become a major beneficiary of the stay-at-home order enacted by the spreading Covid-19 pandemic.
The streaming giant generates roughly 45% of its total revenues from its U.S. user base. As of the past year, this growth is achieved through price hikes – not a significant increase in paid memberships. Netflix raised its domestic prices about 17% year-over-year, with U.S. paid memberships seeing a slight decline throughout 2019. On the other hand, international markets remain the company’s sweet spot for paid subscriber growth. In the prior quarter, the streaming service added 8.8 million subscribers globally, beating projections of 7.6 million. Netflix now is credited with more than 167 million paid members worldwide – with 106 million outside the U.S.
Going into 1Q20 results, the streaming company’s valuation is the highest multiple of sales Netflix has recorded over the last decade. Shares are up by more than 9.5x its trailing sales. But unlike the majority of Wall Street names reporting this quarter, Netflix has not revoked its forward-looking guidance. For the company’s next quarter ending in June, the streaming giant guided revenue growth rates to expand by 30% year-over-year. The company is expected to report EPS of $1.87 and revenue of $5.74 billion, according to analysts surveyed by Bloomberg. The street is estimating 7.69 million global paid subscribers, signaling a 17% year-over-year increase.