Netflix publishes a solid profit report, but the price of the shares is maintained content

The streaming giant, Netflix, has reported stronger profits for the second quarter and has raised its income forecasts for the whole year, benefiting from the weakness of the dollar, a strong growth of subscribers and the duplication of its advertising income.

The earnings per share exceeded the estimates last quarter, and rose to $ 7.19, while the estimates were $ 7.06. The income increased last 16%, and although this seems a solid gain report, the price of Netflix shares was lower in the posterior market, falling more than 1% in the operations outside. Investors may have been disappointed that the income perspective for the whole year will not be reviewed even more upwards.

A solid content portfolio will maintain high costs in the second semester

The company reported that programs like Sirens, the most recent series of Squid Game and Secrets We Keep, had promoted all income. Sirens had 56 million views, while Dept. Q in the United Kingdom had 28 million views. They also highlighted some of the programs that expect them to be hits in the second half of this year, including a new version of Frankenstein, the end of Stranger Things and Wednesday 2.

Netflix will continue to support local content in the era of tariffs

The company reminded analysts that it does not depend on a single program to increase the commitment, and that even the largest titles, which have millions of views, represent only 1% of the total views in the second quarter. Netflix will maintain its ‘local’ content strategy and develop programs that connect with local audiences. While this is undoubtedly more expensive, it gives Netflix an advantage over some of its other rivals that adhere to the US -based content and helps increase the number of subscribers.

The company expects an income growth of 17% in the third quarter, driven by the growth of subscribers, advertising income and higher prices. However, the company also expects the costs to increase in the second half of the year, which could affect the operational margin. This is typical for Netflix, since most of its new content is launched later in the year, which increases costs and sales and marketing spending is usually greater in the second half of the year compared to the first half.

Netflix winks to Trump’s “Made in America”

Perhaps in a wink to President Trump, Netflix hastened to point out that his most significant investment remains in the US, which represents most of content in content, workforce and production infrastructure. The company estimates that it contributed 125,000 million dollars to the US economy between 2020 and 2024.

Earlier this year, President Trump threatened to add tariffs to imported video content, which would harm the main streaming companies. Although this has not been mentioned since then, it is likely that Netflix is trying to follow a narrow path to avoid inciting the anger of the White House.

The Netflix assessment hinders the reaction of the price of the profits to the profit report

In general, the response contained at the price of Netflix shares after this profit report may be due to its high assessment. The price ratio to 12 months is 45.13 times the profits. Therefore, it is not surprising that investors are becoming demanding regarding income forecasts and are demanding increasingly high updates to justify the purchase of shares at this high price. However, the average movement in the price of Netflix shares 24 hours after a profit report is more than 8%, so we will see if there is a delayed reaction later on Friday.

The solid profit reports so far do not translate into huge profits for variable income

At this early stage of the profit season, the growth of sales and profits is increasing, and there have been more positive than negative surprises. However, the reaction of the stock market has been contained and, so far, the S&P 500 has only risen 0.5% in the last five negotiation sessions. The movements in the prices of the actions of the largest companies after the profit report are well below the average movement 24 hours after an earning publication. For example, the price of JP Morgan shares has risen 1.5% this week, even after reporting a spectacular gain report for the second quarter, lower than the average movement after a profit report, which is 2.6%.

In general, the profit season will enter into full activity in the coming weeks. Until now, although companies suggest that the US economy remains resistant, high shares prices are hindering market reaction.