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Netflix Inc. surpassed 200 million streaming subscribers for the first time at the end of 2020, as registrations rose again despite rising prices in the United States and Canada.
Tuesday afternoon, Netflix NFLX,
reported 8.5 million new net subscribers in the fourth quarter, a dramatic increase from 2.2 million in the previous quarter and well ahead of estimates from Netflix and analysts. Netflix attracted 25.9 million new subscribers in the first half of the year, as shelter-in-place orders linked to the COVID-19 pandemic spread globally, for an annual net gain of 36.6 million subscribers for a total of 203.7 million.
This performance led to Netflix’s revenue increase to $ 25 billion for the first time and a 48% profit increase for the full year. Executives gave investors special treatment after the big gains, telling them they expected the cash generated by the company to reliably fund day-to-day operations in the future, after years of using massive debt to fund its growing library of video content.
The news pushed Netflix shares up more than 10% on Tuesday after hours, despite lower than expected earnings. After big gains amid the surge in early 2020, Netflix shares have calmed down in the second half of the year and are down more than 5% in the past three months.
The No.1 streaming service reported fourth quarter net income of $ 542 million, or $ 1.19 per share, compared to net income of $ 1.30 per share in the last year’s quarter. . Revenue increased to $ 6.64 billion from $ 5.47 billion a year ago. Analysts polled by FactSet had expected adjusted earnings of $ 1.36 a share on sales of $ 6.6 billion.
After Netflix reported modest gains in the third quarter, there were fears that demand for Netflix would cool as competition and content intensified, such as Walt Disney Co.’s DIS,
Disney + and Hulu, Apple Inc.’s AAPL,
Apple TV +, the T of AT&T Inc.,
HBO Max, AMZN from Amazon.com Inc.,
Comcast Corp. Prime Video and CMCSA,
Peacock.
“The strong growth in streaming entertainment has led legacy rivals like Disney, WarnerMedia and Discovery to compete with us in new ways, which we have expected for many years,” the executives wrote in a letter to shareholders on Tuesday. “That’s part of the reason we’ve moved so quickly to develop and further strengthen our library of original content across a wide range of genres and nations.”
Netflix used huge debts to fund the creation of this content, but the executives said in the letter that “we think we are very close to being sustainable. [free-cash-flow] positive ”, and only bolded one piece of text throughout the letter.
“We believe that we no longer need to mobilize external funding for our day-to-day operations,” the bold text reads in the letter.
Netflix began raising the price of popular streaming levels in the United States and Canada late last year in an effort to counter any slowdown in subscriber growth. Executives predict that Netflix would court 6 million new net subscribers in the first quarter of the year, which would be a massive drop from the more than 15 million people who have signed up as COVID-19 worldwide in the first quarter of 2020.
While executives did not provide annual guidance for subscription additions, they said operating margin growth will slow, a sign they plan not to add as many subscribers in 2021. After a Increasing the gross margin by 5 percentage points to 18% in 2020, they expect more modest growth of around 2 percentage points, to 20%, this year.
“We intend to continue to increase our operating margin each year at an average rate of 3 percentage points per year over a period of a few years, but we expect some irregularity,” the executives wrote. “Some years, we will be a little more (like in 2020), others a little less (like in 2021).”
Shares of Netflix have risen 47% in the past 12 months, while the S&P 500 SPX index,
increased by 13%.
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