Netflix Implodes After Huge Subscriber Miss, Dismal Guidance

Indicatively, consensus expects 6.29 million new subs this quarter, higher than the company's own guidance of 6 million, and a notable slowdown from the traditionally strong fourth quarter when NFLX added a whopping 8.51 million new subs. Revenue is expected to come in at $7.14BN, up from $6.64BN in Q4, and resulting in EPS of $2.98, up sharply from $1.19 last quarter. This is as streaming video remains on a hot streak since the pandemic struck. Something else to watch: Netflix bears will get added ammunition if Q2 guidance misses consensus for 7.39 million new users.

Previewing the quarterly result, Bloomberg analyst Doug Zehr writes that “after a blockbuster 2020, Netflix has been bracing for its toughest test yet in 1Q21, given comparisons to a record quarter a year ago when it posted nearly 16 million subscriber gains. The company should be able to deliver on 1Q guidance for 6 million additions given that most re-openings happened only in the latter half of the quarter.”

Media analyst Rich Greenfield listed several questions that he thinks investors should ask Netflix’s management, among them: why Netflix paid such a high price for the rights to future Sony movies and whether those films will come to Netflix in a shorter window than “Pay 1” films have historically.

Another thing to watch out for is how a slowdown in production last year is affecting the service. The filming of new shows and movies basically came to a standstill in early 2020, which curbed output in the following months.

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So with all that in mind, was Q1 the quarter that would finally unleash another repricing higher for Netflix stock? Alas, not this time because despite a solid beat in revenue and EPS, Netflix reported absolutely dismal subscriber numbers.

First, the good news, a beat on the top and bottom line:

  • Netflix 1Q Rev. $7.16B, Est. $7.14B
  • Netflix 1Q EPS $3.75, Est. $2.98

And then the absolutely dismal news:

  • Netflix 1Q Streaming Paid Net Change +3.98MM, Est. +6.29MM, and down from +15.8MM a year ago.
  • Netflix Sees 2Q Streaming Paid Net Change +1.00M, Est. +4.44M

Here is the full ugly breakdown, which among other things shows that the company's LatAm ARPU is down 8% Y/Y:

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