Netflix blames price changes and rival launches for lower than expected growth in the U.S and Canadian memberships

Written by: Michael Harris
April 28, 2020
  • Netflix beats analysts' estimate for revenue in the fourth quarter.
  • Netflix gives downbeat guidance for fiscal 2020.
  • Netflix blames price changes and rival launch for lower than expected growth in U.S and Canadian memberships.
  • Netflix performed only slightly upbeat in the stock market in 2019.

The world-renowned American media services provider, Netflix, released its fourth-quarter earnings report on Tuesday. While the results were better than the analysts’ expectations, the streaming service announced downbeat guidance for fiscal 2020. Nonetheless, share prices were reported celebrating in extended trading on Tuesday.

As per Tuesday’s report, Netflix made $1.30 of earnings per share in Q4. According to Refinitiv, analysts had anticipated $5.45 billion in revenue for the American streaming service in the fourth quarter. The performance results earlier today, however, highlighted the company to have generated a slightly higher $5.47 billion instead. On domestic paid subscriber additions front, FactSet had estimated 589,000 while the report suggested a much lower 550,000 new additions in this league in Q4. On the other hand, Netflix accentuated 8.33 million international paid subscriber additions in the fourth quarter versus the experts’ forecast of 7.17 million, as per FactSet.

Netflix’s Guidance For Fiscal 2020

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As per the fiscal 2020 guidance by Netflix, the company expects to generate $5.73 billion in Q1 revenue while the quarter is expected to see $1.66 of earnings per share for the streaming service. While analysts’ estimate for EPS in the first quarter is capped at a lower $1.20 per share, they expect Netflix to generate a slightly higher $5.76 billion in revenue in 2020’s Q1. Analysts have also highlighted their expectation of 7.86 million paid customers for the company in the first quarter while Netflix itself estimates a lower 7 million paid customers instead.

While the recent quarter saw $1.7 billion of negative free cash flow for Netflix, the streaming service expects it to widen to $2.5 billion in the current quarter. Despite the grim outlook, Netflix showed confidence that it will soon be able to turn free cash flow positive later this year.  

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Disney Plus Is Yet To Go Global

As per the sources, Netflix blamed the recently changed prices for lower than expected growth in the U.S and Canadian memberships, in its letter to the company’s shareholders. The launch of rival streaming services like Disney Plus, the company added, has also contributed to weighing on the quarterly performance. It is noteworthy that Disney Plus has not yet been introduced to the global audience.

Netflix opened at around $334 in the stock market on Tuesday. Following the earnings report, the stock was reported trading as high as $348 during the after-hours trading, which marks a modest gain of around 15% for Netflix as compared to that of January 2019.