- Netflix released earnings report for Q3 2020
- Higher than expected revenue, EPS miss
- Huge slowdown in user base growth
- Company remains optimistic about 2021
Netflix (NFLX.US) reported earnings for Q3 2020 yesterday after the Wall Street session closed. Release turned out to be a disappointment, especially when it comes to user growth, and caused the stock to pull back in the after-hours trading. However, the company remains optimistic about 2021 as production resumes.
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Netflix reported another quarter of record revenue. However, growth continued to slow and was the lowest since the final quarter of 2019. Source: Bloomberg, XTB
Results
Netflix generated $6.44 billion in revenue in Q3, above $6.38 billion expected by markets. Earnings per share at $1.74 were much lower than expected $2.14. However, the biggest miss came in net subscriber additions. Company said that it has added net 2.2 million users globally while analysts pointed to a 3.57 million addition. In the same period last year Netflix added net 6.8 million subscribers. Asia-Pacific region accounted for 46% of net subscriber additions in Q3 2020, thanks to big increases in Japan and South Korea.
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Netflix added a disappointingly small amount of new subscribers in Q3 2020. Total subscribers growth is relatively high but this is mainly due to a big increase to the user base in the first half of 2020. Source: Bloomberg, XTB
Outlook
Company projects to add more subscribers in the final quarter of the year, in-line with seasonal trends. Netflix projects that it will add 6 million new users in Q4 2020. However, this is still considerably less than 8.8 million in Q4 2019. Slower growth was expected after the company had a stellar first half of the year. As lockdowns were lifted and people spent less time at home in Q3, user growth moderated. Netflix expects full-year free cash flow at $2 billion. Executives of the company said it has restarted production on many popular titles and that it expects to achieve year-over-year growth in terms of new titles in each quarter of 2021.
Market reaction
Netflix stock fell around 5% in extended trading Tuesday following earnings report. Stock launched today's session with a massive bearish price gap. After failed attempt to break above the resistance at $508.85, which is additionally strengthened by 50 SMA (green line), price pulled back and continues to decline. Should sellers manage to uphold the current momentum then support at $ 457.73 may be at risk.
Netflix Inc. (NFLX.US), D1 interval. Source: xStation5
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