📺 Investors paused on Netflix

What’s going on here?

Netflix’s crackdown on password sharing might have caused family fights and turned amicable breakups into full-on feuds, but the results were worth it.

What does this mean?

Over 100 million households were thought to be sharing accounts with loved ones away from home, so blocking them from tuning in brought in more than 9 million new subscribers, far above what analysts expected. As a result, Netflix’s revenue was 15% higher last quarter than the same time last year, and the firm’s profit rose by an expectation-beating 83%. Yet, the stock dipped after the results. The blame might partly lie on Netflix’s forecast for sales for this quarter, which landed slightly below Wall Street’s expectations. Plus, it won’t have helped that the firm said it’ll no longer report on analysts’ favorite metric, subscriber numbers. Mind you, that came after Netflix’s stock increased 76% in the last six months, the fourth-best performance in the S&P 500.

Why should I care?

For you personally: You’re now watching “The Economy”.

Netflix looks to be set up nicely, with a continuous flow of often exclusive content and profit margins that now sit at 25%. In fact, the streaming company could likely keep its revenue growth in the double-digits for years. The main wildcard is the economy. A downturn could squeeze customers and make them cancel their subscriptions. And if inflation picks up, Netflix would struggle to raise prices without scaring off users. Plus, Netflix’s decision to stop sharing subscriber numbers will put more emphasis on advertising revenue – income that could be sliced in a downturn.

The bigger picture: One streamer’s trash is another’s treasure.

The streaming business is tough going: each subscriber only counts for a tiny pinch of revenue, while company costs are anything but small. So it’s no wonder that rivals like Disney are still reporting major losses, then. That’s working out for Netflix, though: more entertainment companies are selling their content to the streaming service to make quick cash.

What’s going on here?

UK retail sales had a relatively small target to live up to, but they still fell flat in March.

What does this mean?

Retail sales data pretty much does what it says on the tin, tracking the amount of goods that folk buy to indicate the health of consumer confidence and spending. Well in the UK, that indicator was flashing amber: retail sales were flat from February to March, falling below the market’s expectation of a 0.3% increase. See, while shoppers handed over more cash in hardware stores, furniture shops, gas stations, and clothing stores in March than in February, that was offset by drop-offs in food shops and department stores. The good news is that retail sales increased over the whole quarter, thanks to January’s strong stats – enough to put the retail recession behind Brits.

Why should I care?

Zooming in: Here comes the headache.

That data will make the Bank of England’s (BoE) interest rate discussions a lot more complicated. After salaries increased and a national tax was decreased, economists had expected consumer spending to tick upward. So the fact that it didn’t might indicate that the recent rise in unemployment wasn’t based on unreliable data, after all, and is forcing folk to keep their wallets shut. That could persuade the BoE to cut interest rates to stimulate the economy. But at the same time, this week’s hotter-than-expected inflation release will push it in the opposite direction.

The bigger picture: Write your bets in pencil.

Economists are predicting anywhere from two to four 0.25% cuts this year, seemingly adjusting their bets with each contradictory bit of data. And while any interest rate cut would probably help stocks, investors will be hoping for a decent trim. UK companies are trading for cheap, see, and it’ll take a solid economic recovery to light a rally in the market.