Netflix’s Q2 Results Don’t Support Stock Rally

This article discusses the recent performance of Netflix and its stock, as well as the reasons behind its popularity. The article notes that Netflix's revenue growth in the second quarter was only 2.7%, below projections, indicating that it is now considered a slow-growing TV company. However, despite this, Netflix's stock has seen a significant rally, increasing by 62% this year. In comparison, its rival Disney's stock has remained flat.

One reason for Netflix's popularity and stock rally is its profitability. While other streaming companies are burning cash, Netflix generated free cash flow of $1.3 billion in the quarter. However, the article points out that investors typically do not pay a premium for mature companies that generate cash.

The article suggests that investors may be optimistic about Netflix's potential for growth. One immediate opportunity for growth is a crackdown on password-sharing, which has already led to an improvement in subscriber additions. Netflix expects this crackdown to continue impacting revenue growth in the second half of the year. However, the article cautions that this boost in revenue will likely be temporary, as once all the freeloaders have been dealt with, the impact will diminish.

Overall, the article highlights the mixed performance of Netflix, with slow revenue growth but a strong stock rally. It suggests that investors may be betting on Netflix's potential for future growth, although some of the current factors driving growth may be temporary.