Netflix Fourth Quarter Earnings – a Strong Beat on Virtually All Metrics; U.S. Subscriber Numbers Disappoint

Netflix (NASDAQ:NFLX) has reported strong progress numbers for the fourth quarter of 2019 as income grew by nearly a 3rd on an annual foundation and worldwide subscribers surpassed 100 million for the primary time. Nonetheless, the corporate continues to face important headwinds as a number of opponents debut their very own content material streaming providers.

How does Netflix’s scorecard stack up?

For the three months that ended on 31st December 2019, Netflix reported revenues of $5.47 billion which, in flip, marks a rise of 30.6 p.c yr over yr and exceeds expectations of analysts by $20 million. Furthermore, the corporate’s working revenue elevated by a whopping 112.5 p.c on an annual foundation, popping out at $459 million. Equally, the working margin elevated by 320 foundation factors year-on-year to eight.four p.c.

Netflix is About to Skew Viewership Knowledge With This One Easy Trick

Crucially, Netflix added eight.76 million web subscribers this quarter towards a consensus forecast of seven.65 million subscribers, thereby, bringing the whole to 167.09 million. As per the main points revealed, the corporate added eight.33 million worldwide subscribers in the course of the quarter towards consensus expectations of seven.2 million. Nonetheless, the U.S. and Canada area proved to be a weak spot for the streaming big with web subscriber additions of 550,000 towards consensus estimates of 611,000.

Moreover, Netflix reported a GAAP EPS of $1.30 (not similar to consensus estimate of $zero.53 because of tax changes). The streaming firm’s free money circulation metric worsened, nevertheless, popping out at -$1.67 billion within the fourth quarter versus -$1.32 billion within the comparable quarter final yr. Netflix said in its earnings press launch that:

“Our plan is to repeatedly enhance FCF every year and to maneuver slowly towards FCF optimistic. For 2020, we at present forecast FCF of roughly -$2.5 billion. Alongside the best way, we’ll proceed to make use of the debt market to finance our funding wants as we did in This fall’19, once we raised $1.zero billion four.875% senior notes and €1.1 billion three.625% senior notes, each due in 2030.”

The market has reacted positively to the monetary reporting by the streaming big with the corporate’s inventory posting a rise of 1.29 p.c within the after-hours buying and selling (as of 16:57 ET). As of the top of 2019, Netflix has additionally gained the excellence of being the best-performing inventory of the final decade with cumulative good points of over four,000 p.c since 2010.

For the primary quarter of 2020, Netflix expects its income to extend by $5.73 billion vs expectations of $5.76 billion. The streaming big has additionally forecasted a worldwide web subscription progress of seven million towards a progress of 9.6 million registered within the first quarter of 2019. The corporate can be focusing on an working margin of 16 p.c for 2020, a rise of 300 foundation factors yr over yr.

Growing competitors stays the streaming big’s key vulnerability

As talked about earlier, the streaming sphere is turning into extra crowded with the passage of time, a growth that goes towards Netflix. By Could 2020, AT&T’s (NYSE:T) WarnerMedia may have launched its HBO Max streaming service. The $15-per-month service will function 10,000 hours of streaming content material at launch together with 1,800 films and a brand new Sport of Thrones collection. Comcast’s (NASDAQ:CMCSA) NBCUniversal can be anticipated to debut its first streaming service, referred to as Peacock, by April 2020. In accordance with particulars revealed earlier this month, the service will embody 7,500 hours of programing at launch and can supply a free ad-supported streaming possibility as nicely. Lastly, Apple’s (NASDAQ:AAPL) streaming service – Apple TV Plus – launched earlier in November however its library stays restricted to a handful of exhibits for now.

Within the midst of this rising tide of competitors, maybe paradoxically, Netflix has been steadily elevating its costs with its hottest plan at present costing $12.99 per thirty days. This can be because of the truth that the corporate stays the undisputed champion within the streaming sphere. As an illustration, Netflix’s letter to its shareholders contains the next remark:

“We now have a giant headstart in streaming and can work to construct on that by specializing in the identical factor we now have centered on for the previous 22 years – pleasing members. We imagine if we do this nicely, Netflix will proceed to prosper. For instance, in This fall, regardless of the massive debut of Disney+ and the launch of Apple TV+, our viewing per membership grew each globally and within the US on a yr over yr foundation, per latest quarters.”

Submit