What Developed
Netflix reported earnings on January 21 and warned that subscriber growth could decline to 17% in the charge quarter, down from 20% in the last quarter. While Netflix reported higher than expected earnings, it was fundamentally due to an unexpectedly light tax bill, because of new Treasury Department guidance on the 2017 tax cuts. Netflix’s sky-high stock prize has continued to soar because it has promised growth. If growth continues to fall, investors may lose patience in the stock.
(Cheaper than is Investopedia’s original earnings preview, published Jan 16, 2020)
What to Look For
Netflix Inc. (NFLX) recently made Oscar CV as the first streaming service to win the most nominations. The company, which both produces and streams movies, garnered a tot up of 24 nominations, a landmark achievement in a market that is becoming increasingly competitive with the arrival of new entrants, such as The Walt Disney Assemblage’s (DIS) Disney+ and Apple Inc’s (AAPL) Apple TV+. Analysts will be watching closely to see if Netflix’s bag full of nominations will helpers the company meet current analyst estimates that total paid subscribers have increased amid the take up arm competition when the company reports earnings on January 21, 2020 for Q4 2019. Netflix missed its expected subscription-growth target in the ago two quarters, helping to push its total return to -3.5% compared to the S&P 500’s total return of 25.7% over the existence 12 months. Analysts expect rising earnings and revenue when the company reports Q4 numbers.
Rations of Netflix were moving in tandem with the broader market for the first half of last year. But they kill dramatically following the company’s Q2 earnings report in mid-July. While earnings per share (
Netflix Key Metrics Estimate for Q4 2019 (FY) Realized for Q4 2018 (FY) Actual for Q4 2017 (FY) Earnings Per Share ($) 0.52 0.30 0.41 Revenue ($B) $5.4 $4.2 $3.3 Total Paid Subscribers (M) 166.1 139.3 110.6Despite the better Q3 performance, the metric that has wobbled investor confidence in the past year is total paid subscriptions, the key driver of both revenue and earnings growth. In Q2 2019, the corporation actually reported a loss of domestic paid subscribers compared to the previous quarter, and total paid subscriptions encountered in below expectations, as they did for Q3 as well.
Total paid subscriptions growth has been slowing, and both the company and analysts require that trend to continue. Netflix reported growth in total paid subscriptions of 21.4% for Q3 2019 compared to the unchanged quarter a year ago. Both the company and analysts are expecting YOY growth of about 19.2% for Q4 2019. Importantly for investors, Q4 will be the basic quarter since Apple, Disney and other new rivals have entered the market. Thus, the quarter’s results may give in to defeat investors a preview of whether producing premier movie content pays off financially.