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Netflix adds 8.5M users in Q4, blowing away estimates

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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland break down Netflix and P&G’s recent earnings reports.

Video Transcript

JULIE HYMAN: And we've also got to get back to markets and talk about what is happening there, as well, because even as, of course, these events in Washington and this new administration will have an effect on markets, we watch our markets in the here and now, as well, and watching some earnings. Got to start with Netflix. Netflix came out after the close of trading yesterday.

And we're used to Netflix beating in terms of its subscriber numbers, but this is a pretty wide margin, right, 8 and 1/2 million new customers. Just over 6 million is what was estimated. As we have seen recently, a lot of that growth is coming outside of the United States. That's where Netflix really has been expanding.

But Brian Sozzi, as you wrote in a piece reacting to the numbers, it wasn't just the growth outside the United States. They had some-- some more growth in their core market as well.

BRIAN SOZZI: Yeah, I'll tie this in a bow real quick, Julie. Netflix came out yesterday, and they delivered really, everything that Wall Street has clamored for with Netflix for the next 5 to 10 years. Finally, they brought really, insight into that-- those strong expectations that the Street has had for many, many years to life.

They said that could start happening this year. They came out and said, you know what, we're not going to have to go out there and continue to fund our business with debt. We see free cash flow improving. In fact, they improved their cash flow outlook by a billion dollars quarter-over-quarter in terms of an outlook.

They also said margins are about to go through the roof, over 20-- about 25% in the current quarter. Keep in mind, in the fourth quarter they were about 14 and 1/2%. That tells you this company has pricing power. Consumers are not getting off the service because Netflix came out and raised prices back in October.

And they also said-- they also slipped this in the bottom of the press release, guys, you know what, we're going to start potentially buying back our stock very soon. Netflix points out that it bought back a lot of stock in 2007 to 2011, and it will do so again. Again, really, a lot more here than just subscriber count.

MYLES UDLAND: And I would just add, putting on my Jared Blikre hat for a second, if you look at stock right now trading at a record high, and if you look at the performance of the stock over the last six months, it had really done nothing and kind of had a nasty double top pattern forming there. There was a lot of skepticism around whether Netflix would be part of that tech leadership group as we get into what most investors think is the next leg of this market rally.

And now we see, again, the stock breaking out to record highs this morning. I think that's very constructive, not just for Netflix, as Brian outlined all the fundamental cases, but I think for technical market leadership where, again, those big-cap tech names that kind of languished for the last few months, while small-caps, financials, so on had done a lot of the work. So I think constructive for the markets to see Netflix here at a record high.

JULIE HYMAN: And finally, just to put a fine point on something that Brian mentioned, and that is the debt situation, that Netflix is not going to be taking on new debt. The subscriber growth is part of the long-term narrative, right. That debt story is really a turning of the page for Netflix that it's going to have sustainable-- it predicts at least, it's going to have sustainable free cash flow.

And that really puts to bed one of the negative-- one of the bear case narratives about Netflix was that its cash situation was never that secure, because it kept pumping money into new programming. Well, it did, and that paid off. And now it looks like it no longer needs to do so, which is really interesting.

Let's talk about another company that came out with its numbers, and that's Procter & Gamble. It boosted its outlook. And I know, Brian, you had a chance to talk to the chief financial officer at P&G about those numbers.

BRIAN SOZZI: Yeah, right-- right, Julie. I'm surprised to see P&G shares only up under 1% in this quarter. I mean, they really blew it away in so many areas of the business. We'll have more on my conversation with P&G's vice chairman, CFO later in the show, Jon Moeller. But I asked him-- today is Inauguration Day, and I asked him, does Inauguration Day and the change in the White House, will that impact P&G's business in the months ahead?

JON MOELLER: First and foremost, first, second, and third, we're focusing on meeting consumer needs in a-- in a preferenced way, in a way that delights consumers and improves their everyday life. And when we do that and-- and well, we're much less concerned about who or what party is in office or what the political environment is.

BRIAN SOZZI: So that's-- that's Jon Moeller, P&G's vice chairman and CFO, guys, saying, you know what, no matter who's in the White House, we're going to sell a lot of Tide, and we're going to sell a lot of Gillette razors to really, a US consumer that remains trapped in their home during the pandemic and doing a lot more dishes and a lot more laundry.

JULIE HYMAN: And I imagine a lot of executives are looking forward to a time when they're not going to be asked about commenting on tweets, et cetera. Well, we're going to talk more about that theme a little bit later in the show.