Just when investors were starting to lose faith in Netflix’s growth story, the streaming giant came roaring back, proving content is still king.
In the past few weeks, all anyone can seem to talk about is Netflix’s latest blockbuster hit, “Squid Game.” The show has been a major win for the company from both a consumer and investor standpoint, the kind of hit investors are hoping can drive subscriber growth in many key regions, including Asia-Pacific and even the U.S. and Canada.
Since the show’s launch on Sept. 17, it has remained the top show on the platform, and last week Netflix co-CEO Ted Sarandos said, “Squid Game” had a very good chance becoming the company’s biggest show ever. Shonda Rhimes’ show “Bridgerton” currently holds the top spot, followed by French series “Lupin.”
The excitement around Netflix’s fresh content pushed the stock to all-time highs of $640.39 on Tuesday. The company’s market cap was sitting at a cool $283 billion as of market close Wednesday and inched closer to the $300 billion market cap milestone. The only other major media giant to gain access to that exclusive club has been Disney, which joined Dec. 11, 2020, following its investor presentation the day before.
On Dec. 7, VIP+ published a prediction that Disney would be the first Big Media company to cross the $300 billion market cap milestone. At the time, Disney was riding on Disney+’s strong momentum, and now it appears Netflix has found a similar boost.
Even though Disney still has the highest market cap among its peers, its valuation has basically stayed flat since it first crossed the $300 billion mark on Dec. 11. On the flipside, Netflix’s market cap surged 27%, and Comcast gained 12% since then.
Meanwhile, AT&T’s market value sank 12% and dropped below $200 billion. Verizon was not included in the group this time around, as the sale of its media assets was finalized in September.
Many were expecting 2021 to be the year of rapid recovery following a devastating 2020. And while things were moving in that direction in the first half of the year, progress came to a screeching halt when COVID’s Delta variant began wreaking havoc around the world. Plans to return to offices were thwarted, travel plans were halted, and the highly anticipated “return to normal” was no longer looking like reality.
That’s when Netflix struck. It announced an expansion into video games, launched an e-commerce site selling merchandise and held its first ever fan event, “Tudum,” to show off its upcoming content slate. Netflix is on full offensive mode, and its new strategic endeavors are giving fresh hope to investors.
Its comeback arrives as Disney+’s rapid rise loses some momentum. Disney CEO Bob Chapek warned of a slowdown in subscriber growth for Disney+ at the Goldman Sachs Communacopia Conference in late September. Chapek said investors should expect global paid subscriber growth in the low single-digit millions for the quarter ending in September. The warning sent Disney shares plunging more than 4%.
Investors had been banking on Disney+ to provide much-needed support for the media giant during a time in which its core businesses were suffering through the ongoing pandemic. Disney+ growth had been extremely strong and looked like Netflix’s strongest competitor in the streaming wars.
However, the expectations headed into Q3 earnings shifted dramatically over the past couple of weeks. After Netflix’s top position in the streaming wars was threatened following the company’s weaker-than-expected first half, the mature streaming company could surprise investors this time around.
Even so, Netflix still has a lot to prove when it reports its third-quarter financial results on Oct. 19. Beating its own guidance will be crucial to locking in investor confidence in the company again. And who knows? If all goes well, maybe it’ll finally join Disney in the exclusive $300 billion market cap club.
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