Company / Analytics

Analytics, 22 July 2021

Netflix earnings beat expectations

Netflix reported Q2 2021 earnings that beat analyst expectations on new subscribers but missed guidance for Q3 2021.

Netflix has seen fast growth internationally, with more than 57% of its 158 million streaming subscribers and nearly half its revenue so far this year coming from outside the US and Canada.

Netflix confirmed speculations that it will expand more into gaming, noting that it views gaming as a new content category, comparing it to its expansion into original films, animation, and unscripted TV.

But the company faces pressure from tough year-over-year comparisons since last year consumers spent much more time online and in need of entertainment amid the Covid-19 pandemic but now they are going for outdoor activities.

Earnings and Outlook

Netflix reported revenue of $7.34 billion versus $7.32 billion expected. Earnings per share was $2.97 versus $3.14 estimates. The company added 1.54 million new subscribers, above the estimates of 1.12 million.

Netflix said its revenue growth this past quarter came from an 11% increase in average paid streaming memberships and 8% growth in average revenue per membership.

Most eyes were on what Netflix anticipates for its third quarter. While Netflix gained more subscribers than expected in Q2, it fell short of those the company is predicting for Q3. The company’s guidance sees 3.5 million new users in the third quarter, falling short of analysts’ expectations of 5.86 million new users. Much of the optimism comes from Netflix’s upcoming slate of content, as a large amount had been pushed back into the second half of this year and next year. In the first half of this year, Netflix said it has spent $8 billion in cash on content and expects content amortization to be around $12 billion for the full year.

Netflix is facing pressure from tough year-over-year comparisons since last year consumers were in the midst of the Covid-19 pandemic and spent much more of their time online and in need of entertainment.

Netflix said that in its second quarter, its engagement per member household was down compared to last year but was still up 17% compared with the second quarter of 2019.

Netflix has continued to hold its own in the growing streaming wars. But as companies continue to launch direct-to-consumer services, some are choosing to join forces. Certain mergers could put pressure on the company.

Netflix confirmed it was pushing into the gaming space, noting that it views gaming as a new content category, comparing it to its expansion into original films, animation, and unscripted TV. Potential games will be included in Netflix subscriptions at no additional cost, the company said. Initially, the focus will be on mobile games.

Netflix recently hired video-game executive Mike Verdu from Facebook. But the company won’t be relying on features, like gaming or consumer goods, to generate a separate profit pool. Instead, the focus is on making the core streaming service better.

Netflix subscription continues to grow outside the US & Canada

Netflix released three years’ worth of revenue and subscription data this week that shows just how fast the streaming giant is growing internationally.

More than 57 percent of Netflix’s 158 million streaming subscribers and nearly half its revenue so far this year have come from outside the US and Canada, according to the breakdown filed with the Securities and Exchange Commission.

The Asia-Pacific region is Netflix’s smallest but fastest-growing market, the figures show. The number of paid members there has more than doubled since the end of 2017 to about 14.4 million as of Sept. 30, while revenue has jumped more than 82 percent to about $1 billion.

Those are much steeper increases than in the US and Canada, where revenue has grown 10.7 percent and subscriptions have increased 14.8 percent in the same period. Netflix had 67.1 million subscribers and $7.3 billion in revenue in the two countries this year as of Sept. 30, the company said.

More than half — or some 47.3 million — of Netflix’s 91.2 million subscribers outside the US and Canada are in Europe, the Middle East, and Africa, where revenue has risen 68.4 percent to nearly $4 billion since late 2017, according to the numbers.

Latin America boasted 29.3 million subscribers and about $2 billion revenue at the end of this year’s third quarter, up 49 percent and 24.7 percent, respectively, from the end of 2017, the filing shows.

Should I buy Netflix stock?

The current consensus among 45 polled investment analysts is to buy stock in Netflix Inc. The 38 analysts offering 12-month price forecasts for Netflix Inc have a median target of 622.50, with a high estimate of 1,154.00 and a low estimate of 342.00. The median estimate represents a +22.35% increase from the last price of 508.77.

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