Netflix posts higher Q2 results but shares drop after lukewarm forecast

Susannah Streeter, chief investment strategist at Wealth Club, said: “Netflix results have served as a reminder that, after a prolonged rally in growth stocks, strong results alone are no longer enough to satisfy investors.

“While the streaming giant delivered a 9 per cent increase in second-quarter profit and 13 per cent revenue growth, its slightly lower-than-expected revenue outlook for the current quarter was a disappointment, especially in an environment where investors have got used to blockbuster earnings.

“Shares dipped sharply in after-hours trade as questions mount about where the next spurt of growth will come from, especially after Netflix was pipped to the post by Paramount in the battle for Warner Bros.’ streaming assets.

“Concerns are creeping in about where growth will come from and that the company will depend increasingly on price increases, hard won advertising revenues and incremental subscriber gains rather than transformational move.

“However, the twists in Paramount’s own takeover story are a reminder that the strategy of buying growth prospects can come with plenty of problems. What initially looked like a missed opportunity for Netflix has become a far more complicated picture, with Paramount’s proposed deal now facing a federal antitrust lawsuit brought by 12 US states as well as regulatory scrutiny in the UK.

“While Netflix may have lost the bidding war, it may also have avoided years of legal wrangling and regulatory scrutiny. If the Paramount-Warner Bros saga becomes even more bogged down, investors may ultimately conclude that discipline rather than deal-making was the wiser course.”