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Netflix (NFLX) to Post Q4 Earnings: What's in the Cards?

Zacks Equity Research

Netflix Inc. NFLX is set to report fourth-quarter 2019 results on Jan 21.

The company forecasts fourth-quarter earnings of 51 cents per share, implying year-over-year growth of 70%.

The Zacks Consensus Estimate is currently pegged at 50 cents per share, down 3.8% over the past 30 days but indicates 66.7% growth from the figure reported in the year-ago quarter.

Moreover, total revenues, including the DVD business, are anticipated to be $5.44 billion, up 30% year over year and in line with the consensus mark.

Notably, the company’s earnings have beaten the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 26.4%.

Netflix, Inc. Price and EPS Surprise


Let’s see how things are shaping up for this announcement.

Subscriber Addition Likely to Decline

Netflix expects fourth-quarter paid subscriber addition to be 7.60 million, lower than 8.8 million added in the year-ago quarter. In the U.S. Streaming segment, the company anticipates subscriber addition to be 0.6 million. However, in the International Streaming segment, it expects paid subscriber addition of 7 million.

Netflix expects 165.93 million paid subscribers globally, suggesting a 19.2% rise from the year-ago quarter. Streaming ARPU is anticipated to grow 9%.

The U.S. and International Streaming revenues are likely to be $2.45 billion and $2.92 billion, respectively.

The Zacks Consensus Estimate for the U.S. Streaming segment is pegged at $2.46 billion, implying 23.2% growth from the figure reported in the year-ago quarter.

Moreover, the consensus mark for International Streaming revenues stands at $2.92 billion, suggesting 38.7% year-over-year growth.

Will Content Strength Counter Stiff Competition?

Netflix’s content portfolio, comprising original and regional shows as well as movies, is expected to have aided in adding International subscribers in the to-be-reported quarter. The streaming giant is estimated to have spent $15 billion in 2019 on content compared with $12 billion spent in 2018.

The company is working on projects across India, Mexico, Spain, Italy, Germany, Brazil, France, Turkey and the entire Middle East to drive international subscriber growth.

However, Netflix has been affected by heightening competition in the streaming space. Apple AAPL launched its much-anticipated Apple TV+ on Nov 1, followed by Disney’s DIS Disney+ on Nov 12.

Furthermore, Amazon AMZN has been taking initiatives to fortify presence in the global streaming space through its prime video service.

The stiff competition might have had a negative impact on Netflix’s subscriber base. Notably, Disney announced 10 million Disney+ signups a day after its debut. The media giant will give its next subscriber update with first-quarter fiscal 2020 earnings on Feb 4.

Moreover, per Sensor Tower data, Disney+ — which has been downloaded nearly 41 million times across the App Store and Google Play — witnessed $97.2 million in user spending during the first 60 days of launch.

Zacks Rank

Netflix currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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