Netflix stock jumped more than 2.5% in after-hours trading on Tuesday night after the streaming giant blew international subscriber numbers out of the water but fell short on domestic growth.
Jan. 1, 2020
Ahead of reporting on its Q4 results, the market was looking closely at Netflix’s (NASDAQ: NFLX) subscriber numbers, which have been lumpy over the past few quarters.
Indeed, Netflix only managed to pull in 423,000 domestic subscribers in the last three months, a miss on its own forecast of 600,000 additions. However, an increase of 8.3 million subscribers in overseas markets came in well above the 7 million that the company was expecting and now leaves Netflix with 106 million international subscribers. In total, Netflix now has 167 million paying subscribers worldwide, including 60.4 million in the U.S.
Here are the main financial highlights from Netflix’s quarter:
Netflix Q4 Earnings Report Highlights:
|Company Q3 Performance||Analysts’ Expectations||Year-Over-Year Increase|
|Revenue: $5.47 billion||Revenue: $5.45 billion||31%|
|EPS: $1.30||EPS: N/A due to one-time tax adjustments.||N/A due to one-time tax adjustments.|
|Global Paid Subscribers: 167 million||19.9%|
What does this mean for Netflix investors?
In the short-term, investors can expect some volatility as the company only forecasted the addition of 7 million new global paid subscribers in the current quarter — a decrease of 27% on the same quarter last year. This is being blamed by management on troubles in the U.S. like the timings of big releases and the impact of past price increases.
In an increasingly crowded streaming field, it’s probably not accurate to say that the likes of Disney (NYSE: DIS) and Apple (NASDAQ: AAPL) are taking significant market share from Netflix yet. However, management did reference the growing competition in its letter to shareholders, stating that in the “transition from linear to streaming entertainment”, Netflix has “a big headstart” and will “work to build on that by focusing on the same thing we have focused on for the past 22 years — pleasing members.”
Strangely, management also included a Google Trends chart showing that its new original series, ‘The Witcher’, was searched more than original series from competing services’ like Disney + and Amazon Prime.
Going forward, it’s becoming increasingly clear that Netflix’s future growth lies overseas as the company reaches a saturation point in its native market. There are plans afoot for this already, however, with the company investing heavily in India over the past year — including the launch of a mobile-only plan that costs less than $3 per month — as well as investing heavily in Korea through content and TV studio deals.
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