What Netflix's roller-coaster week and earnings report say about its pricing power and growth potential (NFLX)


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  • Netflix’s third-quarter earnings on Wednesday alleviated some fears that the streaming company might be floundering just as new rivals like Disney Plus and Apple TV Plus were set to launch. 
  • Strong international growth signaled that Netflix was still the high-growth company investors thought.
  • But the company’s fumble on its home turf in the US raised questions about Netflix’s pricing power looking ahead.
  • Visit Business Insider’s homepage for more stories.

Netflix shares rose earlier this week on a fine earnings report Wednesday that Wall Street thought would be terrible.

Then the stock soured as reality set in that the streaming-video company is still facing heightened competition at a time when its own growth is slowing.

Shares of Netflix ended the week at $275.30, down about 3.5% from where they started.

The most glaring issue in the third-quarter report was Netflix’s fumble on its home turf. The company signed up fewer paid subscribers than it forecasted, in part because it was having more trouble keeping existing members around after raising prices earlier in the year. The miss came after Netflix lost subscribers in the US a quarter earlier. 

It prompted more questions from Wall Street analysts and investors about the limits Netflix’s pricing power, and how much the service could realistically continue growing in the US.

“It’s hard to deny the US is maturing,” analysts at Macquarie wrote on Oct. 17. “We expect competition coming from Disney Plus and others especially in the US will have only modest effect on churn, but we think it will be hard for Netflix to grow much more in the US, and we suspect pricing power is limited.”

Read more about what the third quarter suggested about Netflix’s pricing power: Netflix’s price hikes hurt growth in the US, and its pricing power will face an even greater test as new rivals launch

Netflix surprised overseas. The company came in ahead of expectations, adding nearly 6.3 million paid subscribers internationally, where analysts were estimating it would add just 6 million.

Ahead of the report, data from SimilarWeb that was exclusively shared with Business Insider signaled where Netflix was gaining ground internationally: Exclusive data that predicted Netflix’s big Q2 subscriber miss suggests international growth has bounced back

While the strong international showing may have satisfied some investors, others are looking to the fourth quarter and 2020 to firm up their bets on how Netflix will stand against soon-to-be rivals like Disney Plus and Apple TV Plus.

Disney Plus is already snatching attention from streaming users, who say they plan to subscribe, and the service doesn’t launch until November: Exclusive data shows how much buzz Disney Plus, Apple TV Plus, and HBO Max have built with streaming users before launch

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