Netflix Stock Jumps 12%, Market Expects Biden’s Inauguration

20 Jan 2021 · 3rd Party Analysis

WRITTEN BY ThorFX

In Summary

  • The video streaming giant exceeds expectations
  • Challenging start for the new president

Shares of the video streaming pioneer Netflix soared after subscriptions surpassed 200 million. The streaming giant released its latest earnings report yesterday after the markets closed. Netflix Inc has grown its user base by 8.51 million new customers in the fourth quarter of 2020, beating its estimations and Wall Street’s forecast of 6.06 million.

Netflix shares are up over 12% in premarket trading as investors cheer the results at the end of the biggest year on record for Netflix. The report addressed to shareholders stated that Netflix will no longer need to raise debt to fund its spending for content on the platform. Additionally, it may also begin to return money to shareholders through stock buybacks.

Most of the new 8.51 million sign-ups came from outside the US. The streaming company had over 200 million subscribers at the end of 2020 as 37 million paying customers were added throughout the year. In 2020, Netflix stock has grown by 65% to reach a valuation of more than $200bn. Last year was especially favorable towards the platform as the global pandemic aided the company’s inflow of new users since many were at home with lockdown restrictions. In the first quarter, Netflix added 15.77 million paying customers. For the second and third quarters, Netflix has grown by 10.09 and 2.20 million subscribers, respectively. Over the past 10 years, it borrowed more than $16bn to fund its day-to-day operations.

Key Challenges Set the Tone for the New Presidency

Elsewhere, US futures point to the upside on Wednesday as Donald Trump is set to depart from Washington and head to Florida for his farewell event. The main event, however, will be the inauguration of the 46th President of the United States, Joe Biden. Former Vice President Joe Biden will enter the White House today at noon. Mr. Biden will face major challenges from the first day as the country is swept by the pandemic, the economic growth has slowed down and the nation is politically divided. To tackle the pandemic, Mr. Biden will be pushing for the immediate passing of his stimulus plan worth $1.9tn.

His pick for Treasury Secretary, former Federal Reserve Chairwoman Janet Yellen, urged lawmakers yesterday in her confirmation hearing to work together for the passing of the fiscal stimulus. She vowed to work towards the rebalancing of the US economy and creating more prosperity for the nation. Additionally, she took a hard stance against currency manipulation and affirmed the US position to allow the US dollar to be market-based.

The market took well the comments by the Treasury Secretary nominee. The US dollar remained little changed, slightly to the downside, while gold pushed higher to reach above $1,850. Ahead of the Inauguration, market participants remain optimistic as benchmark indexes indicate a higher open, led by the Nasdaq, up over 0.50% in the premarket. S&P futures and Dow futures are also in the green. European markets are having a fairly positive trading session today. The German DAX is gaining the most, up roughly 0.60%, followed by the French CAC40, higher by 0.50%. UK’s FTSE is trading flat on the day.

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