Business Essentials for Professionals


Netflix Stocks Fall Despite Beating Market Expectation In Revenues And Subscribers For Q4

Netflix Stocks Fall Despite Beating Market Expectation In Revenues And Subscribers For Q4
Despite adding more subscribers to its paid platform during the holiday season than had been expected by the markets, its shares dipped after Netflix Inc. released its earnings for fourth quarter. 
There was a drop of about 3 per cent in immediately after the announcement of the earnings even as the company reported more profits than analysts expected apart from beating the expectations for subscriber numbers. The revenues however fell just a bit short of expectations of analysts.
Following a change in the manner in which the company reported addition of customers where in the Netflix excluded counting as new members those who are on free trail memberships, the company reported 8.8 million new paid subscriptions. According to FactSet, the expectation of the market was addition of about 7.5 million new paid subscribers on average by Netflix. There was some issues for Netflix in accurately forecasting subscriber additions as the company overestimated growth in its second-quarter forecast and ended up way short of the forecast in its third-quarter projection. This resulted in huge changes in its share price after those reports were released.
On sale of $4.19 billion, net income of $133.9 million, or 30 cents a share was reported by Netflix. In the same period a year ago, the company had reported sale of $3.29 billion and earnings of 41 cents a share. According to FactSet, earnings of 24 cents a share on sales of $4.21 billion was expected by analysts on the average. 23 cents a share on sales of $4.2 billion was the forecast for the quarter by Netflix.
“I think the numbers are pretty damn good, I guess I’m a little more forgiving than Wall Street,” Forrester analyst Jim Nail said.
“They had more net adds in Q4 this year than they had last year, they’re now approaching 50% penetration of U.S. TV households,” Nail pointed out. “They’re still growing faster than they did last year, and that’s pretty damn good.”
It was just three days ago that Netflix had announced its biggest ever increase in price for its subscription service ever since the company had broken up from the DVD-by-mail business which had made it very popular. There was no impact on eth subscriber number in late 2017 when the company had increased its charges the last time.
“We think our job is to effectively invest the money that our subscribers give us every month so that we can give them incredible content and a better and better product experience,” said Chief Product Officer of Netflix Greg Peters. “And if we do that well, we create more value for our subscribers and then occasionally we’ll come to them and we’ll ask for a little bit more money so that we can actually start that next cycle of investment.”
Not many consumers can be expected to opt out because of the increase in subscription price, said Nail who focuses on tech’s consumer business and marketing.
“Even at $13 a month, that’s like one movie ticket. So you don’t have to watch it a lot to do a little calculation in your head and say, ‘Yeah, this is still worth it,’” he said.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc