Netflix will report fourth-quarter earnings Tuesday afternoon, closing the book on a coronavirus-modified 2020 and setting the tone for a more competitive market in 2021.
The streaming leader was recently the first entertainment company to report quarterly results, starting each week-long earnings season. Parents of new competitors such as Disney +, HBO Max, Apple TV +, Peacock and Discovery + will soon also report numbers and highlight their progress.
As the global queen with 14 years of power is at hand, Netflix is entering a earnings day with 195 million subscribers, more than double the score for fast-rising Disney + and other competitors. The company plans to add 6 million total subscribers in the fourth quarter and reach 201 million. That would be an improvement over the 2.2 million it added in the third quarter and would rise 3% in a row. That’s only half the improvement rate at the end of 2019, when the company achieved a 6% increase from the third to the fourth quarter.
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In terms of financial results, Netflix projected revenue of $ 6.6 billion in the fourth quarter and earnings per share of $ 1.35. The programming highlights for the quarter include the fourth season of The crown, the debut of the left-field hit The Queen’s Gambit and original films such as The Christmas Chronicles 2 and Oscar hopeful as Mank.
Investors have been pushing the “pause” button on Netflix shares lately. They fell 6% to start the year and ended last Friday at $ 497.98, a good amount lower than the 52-week high of $ 575.37 set in July last year. Although bulls clearly weigh more heavily in carrying Netflix, many skeptics point to the recent price increases and the flattening of growth in the US as a source of concern. For years, the company had an abundant room to maneuver as a pioneer, but now customers have an emerging array of choices, and other services load up with prestige titles, some of which are popular library titles taken back from Netflix.
Many Wall Street analysts estimate slightly north of the company’s guidance, despite a pull-forward of subscribers during Covid-19 earlier in 2020. The company added 26 million subscribers in the first half of last year, nearly as many new customers as it is reported throughout 2019.
Benjamin Swinburne of Morgan Stanley reiterates his “overweight” rating on Netflix shares, with a $ 12-month price target of $ 650. In a comment to clients, he stressed “enough free cash flow generation in 2022 and beyond.” , as well as a boom of more than 70 original feature films, which should boost the price power. The company’s investment in local original programming around the world also provides a ‘long run’ for continued subscriber addition.
JP Morgan’s Doug Anmuth also reiterated its “overweight” rating, with a price target of $ 628. performing well and driving a vicious circle of strong growth in subscribers, more revenue and growing profits, “he wrote in a research note. “We expect Netflix to continue to benefit from the global increase in Internet-connected devices and the growing consumer preference for on-demand video consumption via the Internet, with Netflix approaching 300 million paid sub-enterprises by 2024.”
Disney estimated similar numbers with Disney + at the time, but revenue and revenue per user have so far been at inferior levels to Netflix. HBO Max, meanwhile, is monitoring 75 to 90 million subscribers in 2025, of which about two-thirds are in the US
A media veteran, Jason Bazinet, an analyst at Citibank, recently recommended Disney as a better investment tool than Netflix. It maintains a “neutral” rating on Netflix shares and last week raised its price target to $ 580 from $ 450.
“We prefer Disney for two reasons,” Bazinet wrote in a note to customers. ‘First, as a late participant, we think Disney has a faster and easier way to grow over the next three years. Second, we suspect that Netflix may have a few brackets over the coming quarters, as price increases may dampen the quarterly net contribution, which is disappointing street tactics. Disney, on the other hand, tends to keep prices relatively stable. ”
Well-known Netflix bear Michael Pachter of Wedbush Securities recently issued a surprisingly positive rating, at least by its usual standards. He said the company could be ‘on track for a sustainable free cash flow’, but he still considers its shares overvalued. Its 12-month price target is $ 235, with an “underperformance”.
While Pachter expects only 5 million new subscribers in the fourth quarter, well below the company’s guidelines, it says revenue should meet the price increases. The most popular US subscription plan was from $ 13 to $ 14 per month.
He also noted that the film puts more than one new film on the platform each week, which he called an ‘ambitious and expensive goal’. Nevertheless, global expertise and a huge head start in managing original and library money ‘led the company to maintain its content over its competitors’, he admitted. “We expect the lead to continue within the foreseeable future.”