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In One Chart - July 11, 2018

In One Chart: Netflix Climbs Ahead of Earnings

Netflix (NFLX) is the top performing S&P 500 component in 2018 — up 118.1% since January 1. The internet-TV stalwart will release its earnings report on Monday, July 17 and the market is anything but bearish.

In fact, Netflix has already surpassed its $365.57 price target, a mark it wasn’t expected to reach until December 2018. Netflix closed Wednesday at $418.04 and also earned an increased price target of $500 from Credit Suisse.

Netflix management has stated it will spend $8 billion on original content alone in 2018. Original content has been a main driver of Netflix’s past and present success. Having adopted the long-proven HBO model — paying high price tags to produce premium original content and attract subscriptions — management guidance for Q2 indicated 6.2 million new subscribers. Analysts on the street have predicted as many as 7 million new subscribers.

The chart below shows Netflix’s price, revenue, and EPS over the last 3 years. All three performance metrics have grown substantially over the period and warrant Wall Street’s increased expectations.

In their long-term outlook overview, Netflix wrote: “In a few decades, linear TV will be the fixed-line telephone: a relic,” and other internet and media companies feel the same.

Competition in the space is heating up. Netflix is already battling the likes of current rivals Amazon Prime (AMZN) and Hulu, but will see even more competition through 2019.

Apple (AAPL) and Disney (DIS) have both announced plans to invest heavily in original content and proprietary streaming services — both are slated to launch next year. There’s also growing pressures from Facebook (FB) and Twitter (TWTR), who have both launched live-streaming platforms for news, sports, and other content.

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