Sections

ideals
Business Essentials for Professionals



Netflix Posts Strong Q4 Results But Doubts Rise About Its 2020 Performance


01/22/2020


Netflix Posts Strong Q4 Results But Doubts Rise About Its 2020 Performance
 Netflix Inc. ended 2019 in a strong note as the video streaming company reported an increase in revenue as well as in its global net subscriber growth. However the company did not provide an encouraging forecast for 2020 as the company is getting increasingly concerned about the the challenges posed to its market dominance by new services.  
 
The shares of the company dropped initially after the company made public its fourth-quarter results, but picked up later.,
 
In a letter to shareholders, Netflix executives noted, “For Q1’20, we forecast global paid net adds of 7.0m vs. 9.6m in Q1’19, which was an all-time high in quarterly paid net adds. Our Q1’20 forecast reflects the continued, slightly elevated churn levels we are seeing in the US plus an expectation for more balanced paid net adds across Q1 and Q2 this year.”
 
Netflix Chief Financial Officer Spencer Neumann acknowledged “some elevated churn from pricing and competition” during a video conference question-and-answer session.
 
The company said that during the fourth quarter, it had gained 8.76 million paid subscribers globally out of which 550,000 were form its home market of the United States.  According to FactSet, market analysts were expecting the company to add 7.9 million paid streaming subscribers globally and 623,000 in the US. In the same quarter a year ago, Netflix had reported a total of 8.84 million new paid streaming subscribers.
 
However the first quarter forecast of the company clearly indicated that it can no longer expect strong domestic growth. The company forecast first quarter revenue of $5.73 billion, which was in line with FactSet estimates. It also projected global paid subscriber additions of 7 million compared to a forecast of about 8.9 million by FactSet.
 
Insisting its “great linear content” is taking away viewers from broadcast TV, the threat from Disney’s streaming services was downplayed by Netflix Chief Executive Reed Hastings.
 
Disney is set to launch its streaming services in Europe in March.
 
Further, there are other rivals in the video streaming sphere such as Apple Inc.  
 
However, the concern of the threat from Disney+ was evident as the company Netflix took quite some time to explain and justify why it believes that Disney’s power will not be able to inflict any significant damage to the company’s growth sources outside of the United States. This extended explanation was unusual for the company because it has historically taken a stance of not discussing competitive forces. The company once said that it believed that the video game Fortnite was a bigger competition to it compared to other streaming services.
 
“Despite the big debut of Disney+ and the launch of Apple TV+, our viewing per membership grew both globally and in the U.S. on a year over year basis, consistent with recent quarters,” the company wrote in a letter to investors.
 
“The streaming service’s massive content and marketing budget can only be justified if the company is adding more subscribers at a robust rate. If that doesn’t materialize, then its stock price will reflect that reality,” wrote Haris Anwar, an analyst at investing.com.
 
(Source:www.marketwatch.com)