Netflix Reports Q4 Revenue Miss

Netflix Inc. (NASDAQ: NFLX) reported its fourth quarter financial results after market close on Thursday. The online streaming service topped earnings and subscriber growth estimates, but missed revenue estimates. Netflix’s shares fell by 4% during after hours, but shares recovered on Friday after analysts defended the stock.

For the fourth quarter, Netflix reported earnings of USD 30 cents on revenue of USD 4.19 Billion. Netflix surpassed earnings estimates of USD 24 cents per share, but revenue fell short of Refinitiv’s expectations of USD 4.21 Billion.

Netflix added 1.53 million new domestic subscribers compared to forecasts of 1.5 million. International subscribers added on another 7.3 million, crushing estimates of 6.14 million. Total overall streaming memberships grews by 24.6% year over year.

Few days before Netflix’s earnings, the Company raised its subscription price again. Netflix’s cheapest plan rose from USD 8 to USD 9, the standard increased from USD 11 to USD 13, and the 4K Premium plan jumped from USD 14 to USD 16. The price hike represents a 13% to 18% increase, which is the biggest rise since the Company started.

Netflix says the funds from the increased pricing will be used for its original content and further accelerate revenue and overall growth. Netflix said its original content like Bird Box, Dumplin’, The Christmas Chronicle and others saw large amount of viewership. The Company is also expanding into the film market with the launch of its original movie: ROMA.

Netflix warned that content costs are driving higher expenses in the second half of the year. Chief Financial Officer Spencer Neumann said during the Company’s earnings interview that original content has  “put pressure on the cash flows of the business and the cash needs of the business over the past few years.” Neumann was hired as Netflix’s Chief Financial Officer after being fired from his position at Activision Blizzard, Inc. (NASDAQ: ATVI) earlier in January.

Netflix noted that it controls approximately 10% of television screen time in the U.S. and slightly less of that in mobile screen time. Internationally, the Company said its screen time earned a lower percentage due to weaker penetration of its service.

Netflix also mentioned that it is directly competing and losing against globally iconic game: Fortnite. The Company highlighted that Fortnite is more of a competition than HBO. Netflix noted that its focus is not against others like Disney+ and Amazon but instead to improve experience for its members.

During Friday’s pre-market hours, Netflix shares rebounded sharply after analysts oversaw its revenue miss, citing its subscriber growth. Shares were trading approximately 0.6% lower, however, shares quickly fell by almost 4% after the opening bell.

Wall Street analysts mostly remain bullish on Netflix’s international growth. Firms such as Goldman Sachs (NYSE: GS), J.P. Morgan (NYSE: JPM), Bank of America (NYSE: BAC), UBS, and others all raised their price targets.

“Given strong net adds growth trends in 4Q and 1Q guidance for continuing subscriber growth with higher pricing, NFLX should alleviate most investor concerns around its growth trajectory… FCF burn and the possibility of pricing related churn hitting the 2Q domestic subscribers are a slight concern but ultimately we view int’l sub growth as the main driver of the stock; we reiterate our Buy rating, and raise our PO to $450 from $440 for faster penetration assumptions in our valuation model.” wrote Bank of America analysts.

For the first quarter, Netflix is forecasting earnings of USD 56 cents on revenue of USD 4.49 Billion. The Company expects to add another 8.9 million new subscribers the next year quarter, growing 24.6% year over year. Analysts are expecting earnings of USD 82 cents per share on revenue of USD 4.61 Billion.

4 Comments
  1. Jon Vince 7 months ago
    Reply

    heard some bulls talking up $NFLX w/o one mention of the upcoming $DIS and or $T rollouts as if they didn’t exist

    • Charlie Corke 7 months ago
      Reply

      $NFLX has the biggest risk in a banking crisis a la 2008. Let’s hope that doesn’t happen.

  2. Oscar Reynolds 7 months ago
    Reply

    $NFLX needs developed mkt subs to deliver on their business plan & not subs in India paying far less. The domestic subs miss is red flag.

    • Erik Gudenas 7 months ago
      Reply

      $NFLX they should just do an equity offering and take out all of the debt, stock probably goes up another 50 points on that

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