Netflix, Inc (NFLX) will be releasing their earnings after the bell today. The big question is whether the largest internet subscription service will be able to follow up last yearâ€™s surge in subscriber growth with another blockbuster year or will competition from Amazon.com Inc (AMZN), stand alone streaming channels and pending Apple Inc (AAPL) and Walt Disney Co (DIS) streaming services take a bite out of their meteoric growth path.
Netflix expects to have added 8.9 million new subscribers in the 1st quarter and revenues of $4.5 billion, both numbers are above analystsâ€™ expectations. In addition to subscriber growth powering their revenue growth, Netflix is raising prices domestically, counting on the strength of their digital offerings to maintain their existing customer base in the face of rising costs.
Netflix is the largest short in the Movies & Entertainment Sector and the overall 5th largest short in the domestic market. Netflix short interest is $5.18 billion; 14.85 million shares shorted; 3.49% of its float and a General Collateral borrow cost (0.30% fee.)
Netflix short sellers are down $1.24 billion in mark-to-market losses, -22.91%, in 2019, but had been recouping a sliver of those losses in April, up $110 million in mark-to-market profits, with Netflix down 2.16% prior to todayâ€™s 4% rally. Shorts are down $212 million in mark-to-market losses today, wiping out Aprilâ€™s early gains.
Netflix short sellers had been building their short positions in the 1st quarter, increasing their shares shorted by $470 million or 1.45 million shares, +9.43%. But in April, weâ€™ve seen their short exposure decline with 452k shares covered, a decrease of -2.96% or $164 million, ahead of Netflixâ€™s earnings release this afternoon. Todayâ€™s rally will add to short sellerâ€™s jitters and a strong earnings release may push short sellers to trim even more of their Netflix short exposure. We are only one million shares above Netflixâ€™s two year low of shares shorted, 13.85
million shares in early January. If Netflix has strong earnings numbers, it is not a long or untraveled road to get back down to the mid 13 million shares shorted level. Which means that there would be over 1 million shares of buy-to-covers joining long shareholders bidding up Netflixâ€™s stock price.