Netflix Hits 203 Million Subscribers as Q4 Earnings Fall Short of Wall Street’s Estimates

Netflix has become the first streaming company to cross the 200 million subscriber mark after announcing on Tuesday it added 8.5 million subscribers during the fourth quarter of 2020. The company now has 203.65 million subscribers overall. At the same time, Netflix’s Q4 earnings fell short of Wall Street’s expectations — but investors don’t seem to be sweating it, with the company’s stock price shooting higher in after-hours trading.

On the financial side, Netflix reported earnings per share of $1.19, compared to the $1.36 EPS analysts had projected. Revenue of $6.64 billion matched analyst estimates, although its 21.5% year-over-year sales growth fell short of the 30% year-over-year growth Netflix enjoyed during the same period a year earlier.

Two key takeaways from Netflix’s letter to shareholders: Netflix said it plans on being cash-flow neutral by the end of 2021 and cash-flow positive every year after. (Netflix said its “very close” to being free cash-flow positive after posting -$138 million net cash flow during Q4.) The company also said “we believe we no longer have a need to raise external financing for our day-to-day operations.”

Netflix added it intends to “maintain $10 billion-$15 billion in gross debt” and will “explore” stock buybacks, something the company hasn’t done since 2011.

Netflix’s 8.5 million new customers easily tops the 6 million the company — and most analysts — had projected it would add during the quarter. Most of those new viewers came from outside the U.S. and Canada, but Netflix did add another 860,000 domestic subscribers, which was up 56% from the year before.

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Investors seemed thrilled at first blush, with Netflix’s stock price jumping 7.15% in after-hours trading to $537 per share.

“2020 was an incredibly difficult year with extraordinary loss for so many families, new restrictions that none of us have ever had to live with before and great uncertainty,” Netflix said in a letter to shareholders. “We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business.”

Heading into Q4, Netflix had added 28.1 million subscribers during the first three quarters of 2020, which was already more than the company added in all of 2019. The company finished its record-setting year with 37 million new customers joining the fold, thanks in large part to the coronavirus pandemic, which accelerated the streaming revolution by forcing millions of people to stay inside, sitting on their couches. More than 80% of Netflix’s subscriber gains last year came from outside of North America.

Top Netflix releases for Q4 included The Queen’s Gambit, which was one of Netflix’s biggest shows ever and helped spark a digital chess revolution, “Bridgerton,” and the return of “The Crown.” It was also the first quarter to reflect the price hikes Netflix implemented in late October, which pushed standard monthly subscriptions to $13.99 in the U.S.; the company’s Premium subscription, its most expensive plan, now costs $17.99 per month.

The company will hold a video conference call to discuss its earnings at 3:00 p.m. PT.

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