Will Netflix Earnings Sink Or Swim?

Netflix’s (NASDAQ: NFLX) earnings call is always a mixed bag of emotions for us here at MyWallSt. On one hand, it’s always interesting to see how the pioneer of the streaming world has performed over the past three months, especially now that we have a global pandemic keeping everyone confined to their living rooms. On the other hand, Netflix’s earnings report always marks the beginning of a hectic few weeks as the rest of the companies in our shortlist start reporting on their Q4 performance.

If you want to know what you should look out for in an earnings report, you can check out our guide here. But, for now, let’s take a look at what Netflix might have to offer.

What are we looking for from Netflix’s Q4 earnings?

With a company like Netflix, the topline figure investors always look for is new subscriber additions. 

Although the pandemic has been a boon for Netflix’s subscriber numbers — they added more users in the first three quarters of 2020 than in all of 2019 — it wasn’t all smooth sailing either. Much of this phenomenal growth was loaded into the second quarter of the year with an impressive 10 million new subscribers added in the early days of the pandemic. After that, growth slowed significantly and new subs hit just 2.2 million in Q3, rocking the company’s valuation. 

For the quarter just gone, the company is expecting to have added 6 million new subscribers, which is a drop from Q4 last year but would still represent a return to growth on a sequential basis. These figures are highly dependent on the slate of content released on the platform over the period, which has included some very popular titles like ‘The Queen’s Gambit’ and ‘Bridgerton’, but also a couple of stinkers like ‘Hillbilly Elegy’.

Aside from subscriber numbers, there are a few other key figures to keep an eye out for. Average revenue generated per user, or ARPU, is always an important metric to keep an eye on as it shows how much money Netflix makes in different regions. 

The amount of money the company plans to spend on content is another massive thing to look out for from an investor’s point of view. In 2020, for example, the company was reported to have earmarked as much as $17 billion on creating exclusive shows for the service. While this figure might seem outrageous (ok, is outrageous), it’s also vital to the success story of the company as new content is what drives Netflix ahead of its ever-growing list of competitors. 

To use ‘Tiger King’ as an example, it was estimated that over 34 million unique viewers tuned in to watch the docuseries its first 10 days of release in the U.S. — roughly half of its subscriber base in the region at the time!

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.