Consumers may be starting to pull back on spending, either from rising prices on goods resulting from tariffs, or simply from rising uncertainty about tariffs and the overall economy. However, breaking down consumer trends, one pattern emerges.
Simply put, consumers aren’t ready to cut back on entertainment spending quite yet. That includes spending on media, particularly for streaming services. With a relatively low monthly cost, that may be one of the last places consumers cut back on.
This trend can clearly be seen with the big earnings beat from Netflix (NFLX). The company reported an earnings beat about 16% higher than bullish analyst expectations. And Netflix is continuing to ratchet up prices, which should improve future earnings in quarters ahead.
Operationally, Netflix has seen revenues rise by 16% in the last 12 months, but overall earnings are up a massive 99%, all while sporting a hefty 22% profit margin.
Action to take: Netflix shares continue to outperform the overall market, and that trend looks likely to continue. Momentum investors may like shares here, but should also look to buy during market fears when shares take a dive with the rest of the market.
For traders, options are a bit pricey, but the July $1,100 calls, last trading for about $45.00, could see mid-double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.