Shares of Netflix (NFLX) are rising over 3% in premarket trading Monday morning after turning in an earnings report that beat Wall Street expectations on the top and bottom lines.

The movie streamer’s results indicate it can keep growing despite tariffs, the trade war, and volatile markets that are sending other stocks lower. NFLX stock could be the best way to beat this market.

Endless Opportunity for Growth
Netflix is showing no real let up in its business expansion. The streamer’s revenue grew 12.5% from last year, an impressive gain from the fourth quarter, which had been 16% higher. It also beat management’s own forecast of an 11% gain.

Profits were the real bright spot, with a 25% increase to $6.61 per share as it benefits from greater subscription and ad sales revenue than expected. It pushed NFLX operating margins to 31.7%, a 360 basis point increase from last year. Management is expecting the second quarter to look even better, though it admits expenses are going to rise in the back half of the year, limiting or negating any further expansion due to movie releases and other programming.

Having generated $2.6 billion worth of free cash flow in the quarter, NFLX maintains full-year guidance for $8.8 billion in FCF.

Netflix no longer reports actual subscriber numbers, but said U.S. sales grew 9% for the quarter, a somewhat soft increase. Now it’s possible that means it lost subscribers as they shifted to ad-supported plans, which would weigh on average revenue per member. Management, however, said growth would reaccelerate in Q2 as NFLX implemented price hikes midway through Q1, which is why it forecast revenue to accelerate 15% for the period.

Key Takeaways
Because Netflix is a digital service, it’s not subject to tariffs or trade barriers, and so can bypass the hurdles producers of physical good face. While there may be some nativism in foreign countries that could lead to cancellations of U.S. services, that’s not impacting Netflix today.

Moreover, any potential recession should likely leave it unaffected because of its price-to-value offerings. As the premier streaming service, NFLX should keep growing regardless, making its stock one to buy now.

— Rich Duprey

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Source: Money Morning