Netflix, the movie and television show streaming service, reported record earnings recently. This, according to reports, was thanks in large part to two new hit shows that the company has independently released: Stranger Things and Narcos. In Monday, October 17th, after hours trading the company’s price rose by about 20 percent, after dropping more than 1.6 percent during the regular trading day.
Netflix’s supporting indices dropped during the day, and Netflix easily outpaced the losses. The NASDAQ fell by 0.27 percent, and the technology sector dropped by 0.27 percent, too. Netflix was expected to post earnings on this day, and thanks to its rising costs of service, experts did not believe that earnings would be nearly as impressive as they were. The average customer saw their subscription costs go up by more than $2 per month, and analysts expected that this would lead to a decrease in revenue for the company. However, because of the strength of the programming that the company has picked up, as mentioned above, this was not the case at all.
Netflix’s earnings were the equivalent of 12 cents per share, which is about a nickel per share better than the company was seeing at this time last year. Many analysts expected to see something slightly lower than that 7 cents per share number because of the anticipated drop in subscription numbers. The raise in rates was a pretty controversial one, but thanks to the quality of product that the company provides, this didn’t happen. While other companies, like Hulu, have cut rates to try to win back their market share, Netflix’s move wasn’t expected to pay off. Thankfully for their investors, it did.
The technology sector has seen many days as of late where overall losses have been posted, and the traders that have been expecting it to do the opposite have been hurting. However, this is one of the best arguments that can be made for being an active trader. Having the ability to profit off of dropping prices will often lead you to being able to more honestly look at a stock—or any other type of asset, for that matter—and attempting to get a better idea of what it is going to do. Once this information is more readily available, then you can make an educated decision on whether the asset will go up or down in price, or if it is going to be unpredictable or moving sideways for a long enough period of time that it is not worth approaching.
You might not ever use the short selling tools that you have at your disposal, but knowing how to more thoroughly look at an asset and being able to profit if you wanted to off of falling prices is a smarter way to trade as it creates many more trading opportunities than you would typically ever have if you only allowed yourself to see profits on rising prices. This is why tools like binary options, put options, the Forex market, and even traditional short sales are so valuable to have at your fingertips. Just having them available at times can cause you to look a bit more closely at your analysis before proceeding and not jump in prematurely.
Netflix is not the only company creating their own brand of show. Amazon is doing so, and so is Hulu. When it comes to increasing prices and vying for customers, having a strong product is key, and Netflix is quickly separating themselves from the pack here. However, while Amazon has other lines of revenue to fall back on, Hulu does not. It will be interesting for short term traders to follow this progression over the coming months and years.