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Waiting for a video game from Netflix?

Netflix, stock, Waiting for a video game from Netflix?

On Wednesday, it was reported that Netflix has hired Mike Verda, a former vice president of Facebook, to head the video games division. The company's shares rose by 1.34% in the main trading session and added another 2.65% in the postmarket.

What happened

At the start of his career, Verdu founded his own software development company, later he sold it and switched to video games. He worked for such companies as Atari, Electronic Arts, Kabam, and oversaw various game franchises. At Electronic Arts, he was engaged in mobile video games, the division released such well-known projects as The Sims, Plants vs Zombies and Star Wars: Galaxy of Heroes. Verdu was the creative director of Zynga in the period 2009-2012.

Netflix declined to comment officially, without confirming the fact of hiring Verdu. In the past, the company has already released games, but only as a marketing move, and not on a permanent basis — and in 2018, it categorically stated that it does not plan to engage in games at all. Nevertheless, rumors about Netflix's entry into the gaming business have been circulating — and it seems that they have finally come true.

Netflix is trying to diversify its video streaming business in the face of growing competition from Disney, Amazon, Apple, AT&T. An online store was recently launched, but it will probably bring less revenue than game development.

What else

Finance

Next week, on July 20, the company will report on the results of the second quarter of 2021. Netflix forecasts EPS of $3.16 with sales of $7.3 billion. Analysts had expected Netflix's earnings to be $2.68 per share on sales of $7.39 billion. A year earlier, Netflix's profit was $1.59 per share on sales of $6.15 billion.

If there is a positive trend in the company's finances, then there is not a positive trend in the number of subscribers. Last quarter, Netflix attracted fewer customers than expected. In the second quarter, it forecasts only 1 million-against 4.4 million predicted by analysts. Weak results are easy to explain. First, the pandemic is a unique phenomenon that has given a huge boost to new connections. The current increase will be clearly less than last year. Secondly, many projects have been postponed, but are expected this year. This can contribute to the growth of the number of new subscribers and those who will renew their subscription.

The company also expects that in 2021 the free cash flow will reach the break-even level, and in 2022 it will become positive. In the future, Netflix will be able to conduct a share buyback, which will be a good driver for growth, but this story is long-term.

Awards

On Tuesday, at the 73rd annual Emmy Awards, Netflix received 129 nominations, which is less than the record of 160 nominations set by it last year.

In 2021, the company did not take the championship, becoming only the third. The first and second places went to Disney and AT&T, with 146 and 138 nominations, respectively.

About children

The company also continues to increase children's content. On Wednesday, Netflix launched the Kids Top 10 program, which recommends content in children's profiles, taking into account its popularity in each country.

This week, Netflix will begin sending parents a so - called "Children's Resume" - a newsletter that includes recommendations based on their children's favorite shows and movies, as well as other tips.

Netflix and Universal Pictures from Comcast are also extending a multi-year deal for exclusive rights in the United States to the franchises of animated films "Minions" and "Puss in Boots". Now Netflix broadcasts other films of the film company, including "Despicable Me" and "The Grinch".

Technical picture

The growth of the last 2 trading sessions allowed us to close the gap down, which occurred at the end of April after the publication of the report. Now buyers are testing the resistance of $555, its overcoming from the bottom up will open the way to the next reference point of $566.

But it is worth considering the RSI indicator: the weekly one does not yet report overbought, and the daily one is already entering this zone. There is still room for growth in the short term, but a correction may occur on the approach to $566.

It can begin even earlier if the nearest resistance is not taken. The current risk is reduced to the point of $530, with a breakdown of the level from top to bottom, a test of the 21-day moving average around $520 may occur.

The long-term outlook remains moderately positive. The imminent release of the financial report can support buyers at a short distance, then new goals will appear.

Since the beginning of the year, Netflix shares have grown by only 1.3%, and over the past 12 months - by 4.4%.

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