Netflix stock tops S&P 500 in May, up 30%

Video-streaming company's stock is the best performer on the S&P 500 Index this month, despite a $1 price increase announced on its subscribers.

Video-streaming company is the top-performing stock on the S&P 500 Index this past month

Investor sentiment is high for video-streaming company Netflix, whose stock soared 30% in the month of May. (Mike Blake/Reuters)

The old adage 'sell in May and go away' warns investors to sell their stocks and buy them back in November to sidestep the weakest trading period of the year.

That strategy did not apply to Netflix.

The video-streaming company's stock is up nearly 30 per cent this month, making it the best performer on the S&P 500 Index. The stock is trading at about 415 dollars a share versus 322 dollars a share on April 30.

The overall S&P 500 index is up less than two per cent.

Why the positive sentiment?

Netflix just raised its monthly subscription cost by $1 for new members in Canada and elsewhere. But unlike in 2011, when the company unexpectedly boosted prices by as much as 60 per cent and lost 800,000 subscribers, the company didn't suffer a customer exodus. This time, users were forewarned of an increase and the change in rate from $7.99 to $8.99 was significantly less dramatic. The change doesn't affect existing customers for another two years. 

Also, with subscriber numbers plateauing in North America, Netflix has announced plans to enter six European countries this year  Germany, France, Austria, Switzerland and Belgium — which will be its biggest expansion since arriving in Europe three years ago. The company already has 48 million customers in more than 40 countries. 

Concerns going forward

Tapping into new European markets won't be easy, or cheap. Netflix's launch in 2007 and subsequent takeoff has spurred new players to jump into the market, especially in countries where Netflix was absent. Netflix will have to compete with Canal Play Infinity from Vivendi's Canal Plus in France and Amazon.com's Prime Instant Video in Germany.

Netflix will also come up against new rules, particularly in France where Netflix cannot use films in its service until three years after they open nationally in theatres.

In an April letter to shareholders, Netflix said the expansion will keep the company's international division in the red for this year, but it expects those markets to eventually surpass the U.S. 

With files from Reuters

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