Netflix records a massive surge in global paid subscribers in the first quarter

Written by: Wajeeh Khan
April 28, 2020
  • Netflix adds 15.77 new paid subscribers globally in Q1 as COVID-19 restricts people to homes.
  • The media-services provider posts £4.68 billion in revenue in Q1 and earns £1.27 per share.
  • The American production company expects negative £810 million in free cash flow this year.

Netflix Inc. (NASDAQ: NFLX) released its quarterly financial results on Tuesday that posted a massive increase in subscribers. The initial response in the stock market was a 10% jump but the stock settled around a 1% gain in extended trading on Tuesday as the company provided conservative financial guidance.

Netflix also highlighted that the ongoing Coronavirus uncertainty makes it difficult to accurately estimate the increase in its subscribers in the subsequent months. The company called its forecast “guesswork.” According to the Chief Executive Officer, Reed Hastings:

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“We don’t use the words guess and guesswork lightly. We use them because it’s a bunch of us feeling the wind and it’s hard to say. But again, will internet entertainment be more and more important over the next five years? Nothing’s changed in that.”

Netflix’s Q1 Financial Results Versus Analysts’ Estimates

According to Refinitiv, analysts had expected Netflix to print £4.67 billion in revenue in the first quarter. In terms of earnings per share (EPS), their estimate was capped at £1.34 per share. In its financial report on Tuesday, however, Netflix essentially matched the revenue estimate posting £4.68 billion in the recent quarter. Its earnings per share, however, came significantly lower than the estimate at £1.27 per share.

Experts had forecast the American media-services provider and production company to add 8.2 million subscribers globally in the first quarter. But Netflix recorded its global subscribers to have increased by a massive 15.77 million in Q1.

Netflix’s letter to its shareholders highlighted that the company anticipates its subscribers and viewership to increase this quarter. In subsequent quarters, however, the growth is expected to lose pace as government lifts lockdown and social distancing measures.

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Netflix Estimates 7.5 Million New Paid Subscribers In Q2

In the second quarter, the company added, it estimates an addition of 7.5 million paid subscribers globally. The number is likely to fall further in the third quarter as the pandemic subsides.

In terms of free cash flow, Netflix forecast negative £810 million this year as compared to its previous estimate of negative £2.0 billion.

At £353 per share, Netflix is currently around 30% up year to date in the stock market. In March, the stock had dropped roughly 10% below its opening level in January 2020. Netflix had recorded an annual gain of roughly 20% last year.

At the time of writing, Netflix is valued at £154.50 billion and has a price to earnings ratio of 112.68.