Netflix’s Q4 Earnings and What to Expect.
Netflix will be releasing its Q4 earnings report tomorrow, 19th of January, after the close of market.
When it releases its earnings tomorrow, investors will be looking for solid evidence that the company hasn’t hit a roadblock in the explosive growth experienced last year during the lockdown period (It attracted more subscribers as people who were locked down indulged in binge-watching). They will also want confirmation that Netflix remains buoyant enough to defend its position as a market leader in the streaming service.
Despite Netflix’s strong position in the market, it’s unlikely that the explosive growth, experienced last year, will continue forever. In Q3, Netflix merely added just 2.2 million new subscribers, a shortfall from the 3.32 million predicted by research analysts and Netflix (N.B: It predicted that it will sign up 6 million new subscribers in Q4).
The incredible demand for streaming content attracted an influx of other large players, making the field a bit more crowded and also creating uncertainty about the future growth of Netflix. Its main competitor is Disney (NYSE:DIS). Through its Disney+ app streaming service, Disney is gaining considerable ground in this field (it added more than 80 million subscribers within the first year of its launch). Other competitors include: Comcast’s (NASDAQ:CMCSA) NBCUniversal’s Peacock streaming service, and AT&T’s HBO Max streaming platform.
Aside from the competitors, what also threatens Netflix’s growth is its tight cash position. Because Netflix spends a lot on the development of its exclusive shows and the acquisition of international markets, it ends up burning a lot of cash every quarter. To improve its cash position, Netflix raised prices for its most popular plan last quarter, which is counterproductive in an environment where people are losing jobs and competition is heating up and could negatively affect its growth.
Netflix’s remote appeal produced awesome gains for investors in 2020, but as its competitors increase, some investors aren’t too sure whether this explosive growth rate will continue.
That said, Netflix is still far ahead in its international reach and content depth (areas not covered by Netflix’s competitors). Due to this strength, in our view, any dip in the price of Netflix’s shares after its earnings report should be taken as a buying opportunity.
