Will The Competition Get To Netflix?

Netflix (Nasdaq: NFLX) recently reported its fourth quarter results that sent the stock falling 4% in the after-hours session. While the company outpaced market expectations on all accounts, it was the outlook that has the market worried. It appears that Netflix may really be facing the heat of competition from Disney+ and others.

Netflix’s Financials

Netflix’s Q4 revenues grew 31% over the year to $5.47 billion, ahead of the Street’s forecast of $5.45 billion. Average revenue per subscriber grew 9%. EPS was $1.30, ahead of the market’s forecast of $0.53. The significantly better EPS in the quarter was due to the reversal of a tax provision that the company had made during the first three quarters of the year.

During the quarter, it added 20%, or 8.8 million subscribers, compared with 7.6 million paid subscribers that it had expected to add. Netflix now has over 167 million paid subscribers worldwide. But the company appears to be struggling to add subscribers in the US market. During the quarter, US subscriptions grew by 420,000, falling short of the 600,000 that it had forecast.

Starting this quarter, Netflix is now providing revenues and subscriber numbers by world regions. For North America, Q4 revenue was $2.7 billion with paid memberships of 67.7 million, which grew by 550,000 in the year. Europe, Middle East and Africa revenue was $1.6 billion driven by a net addition of 4.4 million subscribers to end the quarter with 51.8 million paying customers. Latin America revenue was $746 million from 31.4 million paid members, with net addition of 2 million subscribers. Asia-Pacific revenue was $418 million from 16.2 million subscribers, recording a growth of 1.75 million net subscribers.

For the current quarter, Netflix forecast earnings of $1.66 per share on revenue of $5.73 billion. It expects to add 7 million paid global subscribers, compared to 9.6 million recorded last year and falling short of the market’s expected 8.1 million target. The market was looking for revenues of $5.76 billion for the quarter with an EPS of $1.19.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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