Netflix will report its Q4 2019 earnings in the pre-market session on Tuesday, January 21, 2020. What are the factors to watch for in next week’s report?
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In Sell Zone
a) Domestic market numbers:
The markets would want to know how many new subscribers were added, especially with the emergence of new players in the streaming services industry. Analysts are predicting that the company added 623,000 new subscribers in Q4 2019 (compared to +517,000 in Q3 2019). Investors would like to know if the entrance of AppleTV+, Disney + as well as similar streaming services from Comcast, HB) and AT&T are going to dent the numbers.
b) The International Numbers
Netflix is growing its international customer base steadily. The company only just started sharing the numbers from the global market, segmented into three regions: EMEA (Europe, Middle East and Africa), Latin America as well as the Asia-Pacific. This geometric may not have assumed a significant role in determining the numbers. However, this could change if Netflix starts to see domestic numbers dropping off due to competition.
c) Returns on Content Development
Netflix has spent big on content in the last year. Films such as the Irishman and other Netflix-owned shows have come at a high cost. Market players would want to see how well the company has done in turning these into revenue and profits.
With new metrics now coming into the picture, predicting the price movements of Netflix based solely on domestic subscriber numbers may not be as effective as it was in the past. The weighting of market impact from the local figures will be put to the test by Tuesday’s report, which will feature subscriber data from the international market as well.
Netflix is presently close to testing the $347.02 mark, which is the 23.6% retracement from the Feb 2016 swing low to June 2018 swing high. However, the presence of the descending trendline (upper triangle border) which caps the price candles from the June 2018 swing high till date provides a ceiling which effectively creates a resistance zone. Price has to breach this zone and the trendline to break above the long-term triangle, which opens the door towards $424, where we have the previous swing highs.
On the flip side, failure to break the resistance zone sends the price back towards the lower triangle border, with the lower channel border and the support line at 295.74 (38.2% Fibonacci retracement level) being the barriers to any downside moves.