What's going on?

Netflix�s stock jumped 20% after it reported its latest financial results on Monday! It added a lot more international subscribers than expected (tweet this) and raised its prediction for subscriber growth and revenue for the rest of the year.

What does this mean?

Netflix is, in many ways, a typical �growth� company: it�s spending significantly more money than it makes as it invests in its product (in its case, original content like Narcos). In return, Netflix is establishing market leadership in a fast expanding industry (subscription streaming services). This model isn�t foolproof: it relies on Netflix continuing to grow its user at a high rate, otherwise the cash burn (of expenses being higher than revenue) becomes much more difficult to justify. But the �grow first, make money later� strategy can be a huge success when it works (think: Facebook in social media or Amazon in ecommerce).

Why should I care?

For the stock: The volatility of Netflix�s stock price is indicative of its risk.
Netflix�s stock has been as high as $130 and as low as $83 in the past year (it�s now around $120). That�s one volatile stock! A big reason for the volatility is that Netflix is risky: it�s a go big or go home strategy (pretty much�). Arguably, it�s getting riskier as it aims to borrow more money so that it can increase its spending on original content. The good news for existing shareholders is that the company seems to be growing nicely outside of the US which is, of course, a huge market.


The bigger picture: Netflix is the latest western company to pare back its ambitions in China.
This was supposed to be the year that Netflix launched in China � but they announced on Monday that they would supply local partners with content instead. That�s a big climbdown in a market that was supposed to be a huge growth opportunity for Netflix. The business climate in China, especially for American tech firms, appears to have become more hostile this year – and Netflix has evidently been impacted.