Netflix (NFLX, Financial) released its fourth-quarter results on Jan. 21 after market close. The company recorded earnings and revenue that edged past analysts’ expectations thanks to growing popularity of programs such as “The Witcher” and “The Crown.” Shares soared 2.3% in after-hours trading following the announcement.
Key metrics
The streaming giant posted earnings of $1.30 per share that not only climbed 333.3% year-over-year but also surpassed Zacks Consensus Estimate by 150%. Revenue improved 30.6% from the year-ago period to $5.47 billion.
Netflix added a total of 423,000 paid subscribers in the U.S., which fell short of the 600,000 analysts had predicted. The company attributed the poor performance to price increases as well as the recent launches of rival streaming platforms.
On the global front, the company added 8.33 million paid subscribers, which exceeded the 7.17 million analysts had projected.
The competition
This is the first quarter where Netflix is facing heightened competition from new streaming services. Netflix’s future results would be impacted with the launch of Disney+ and Apple TV+ in November, as well as the upcoming launches of AT&T’s (T, Financial) HBO Max and Comcast Corp.'s (CMCSA, Financial) Peacock. Haris Anwar, an analyst at financial markets platform Investing.com, said:
“The real dilemma for the company lies ahead. Customers will have more choices in streaming services this year. The biggest challenge for Netflix in this dynamic situation is how to maintain a fine balance between growth and spending.”
Disney+ and Apple TV+ are providing low priced services compared to Netflix. While Disney+ costs $6.99 per month, Apple TV+ starts at $4.99 a month. As per a survey carried out by brokerage Cowen & Co., roughly a million Netflix customers shifted to Disney+ following its launch on Nov. 12.
Guidance
Company anticipates earnings of $1.66 per share for the first quarter of 2020. Revenue is projected to be $5.73 billion. In the first quarter, the company expects to add seven million paid customers worldwide. Analysts, on the other hand, predict earnings of $1.20 per share on $5.73 billion in revenue and an addition of 7.86 million paid customers globally.
Disclosure: I do not hold any positions in the stocks mentioned.
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