Netflix, Inc (NFLX Quick QuoteNFLX - Free Report) and social-advertising company Snap Inc. (SNAP Quick QuoteSNAP - Free Report) are seeing increased usage as lockdowns in the wake of the coronavirus outbreak are compelling people to find ways of entertainment at home.

 

However, only one is set to gain when they report first-quarter earnings results on Apr 21, after the closing bell. Let us take a look –

 

 

Netflix recently touched record highs, reaching nearly $200 billion in valuation. Shares of Netflix have surged more than 30% so far this year, primarily driven by investor optimism that the global streaming giant will be one of the rare beneficiaries of the coronavirus pandemic. This is because it primarily provides streaming services, so any lockdown in response to the outbreak won’t have any impact on its subscriber growth.

 

In fact, analysts now believe that Netflix will add millions of users in the first quarter owing to the lockdowns, higher than the company’s projection of 7 million new users. The release of popular documentary series in the quarter like “Tiger King” will also help expand subscriber base. We also have to remember that Netflix had added 8.8 million subscribers internationally last quarter, which surpassed analysts’ expectations by more than a million.

 

Coming back to the first quarter, the company’s subscriber growth is likely to have been driven by focus on original content across various genres and languages, rapid international expansion and partnerships with telcos. To top it, Netflix entered this year’s Oscars with 24 nominations, and walked away with two wins. Such wins certainly help lure and retain subscribers in the face of challenges from rival services like Disney+ and Apple TV+.

 

Nonetheless, Bank of America analyst Nat Schindler expects Netflix’s global subscriber additions at 8.4 million in the first quarter, while Eric Sheridan of UBS is expecting the company to add 9.5 million users. When it comes to Netflix’s subscriber additions, Credit Suisse’s Douglas Mitchelson is equally bullish and expects 9.64 million new subscribers for the first quarter.

 

And with subscriber count widely expected to have expanded in the first quarter, the company’s top line will likely improve. Netflix, thus, is projected to record revenues of $5.7 billion for the first quarter, suggesting improvement from $4.5 billion raked in a year ago.

 

 

 

The Zacks Rank #2 (Buy) company also has an Earnings ESP of +2.38%. A positive Earnings ESP and a solid Zacks Rank indicate that the stock has the best chance to come up with a positive surprise in its upcoming earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

 

Positive results, no doubt, will lead to a rally in the share price. Thus, the company’s expected earnings growth rate for the next quarter is 156.7% against the Broadcast Radio and Television industry’s estimated decline of almost 13%. What’s more, the company’s projected earnings growth rate for the current year is a solid 45.8%.

 

 

 

Snap is one of the worst positioned stocks in media heading into the first-quarter earnings season. Even though its users have increased, courtesy the pandemic-induced lockdown measures, its profits are mostly dependent on advertising revenues from its popular Snapchat platform.

 

However, companies are cutting down on ad spending as the coronavirus has weighed on their profit margins. In fact, many companies have now depleted their ad budgets, and that doesn’t bode well for Snap. To top it, since its IPO, Snap has been pretty pricey compared to peers. Thus, the company’s rich valuation is not attractive in the crisis.

 

No doubt, Snap lost 4.6% last week and 33% over the past three months. And since a tenacious decline in price per ad impression is expected to have upset advertising revenues in the first quarter, the Zacks Rank #3 (Hold) company has an Earnings ESP of -15.91%. At the same time, mounting infrastructure costs and higher investments in content, sales and marketing are a few lasting overhangs on profitability.

 

 

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