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Why Is Netflix (NFLX) Up 11.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Netflix (NFLX - Free Report) . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Netflix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Netflix Q4 Earnings Miss, User Growth Drives Top Line
Netflix reported fourth-quarter 2020 earnings of $1.19 per share, missing the Zacks Consensus Estimate by 13.8% and the company’s guidance of $1.35. Moreover, the figure decreased 18.4% year over year.
Revenues of $6.64 billion increased 21.5% year over year and also beat the consensus mark by 0.3%. Average revenue per membership was flat year over year both on a reported and foreign-exchange neutral basis.
The streaming giant added 8.51 million paid subscribers globally, which declined 2.9% year over year but beat its guidance of 6 million paid-subscriber addition.
At the end of the fourth quarter, Netflix had 203.66 million paid subscribers globally, up 21.9% from the year-ago quarter, beating management’s expectation of 201.15 million paid subscribers.
The strong growth reflects Netflix’s solid content portfolio amid growing competition from services launched by Apple, Disney, ViacomCBS, AT&T, Discovery and Comcast.
Notably, the company now expects paid net additions to be 6 million compared with the year-ago quarter’s 15.77 million for the first quarter of 2021, reflecting stiff competition.
Segmental Revenue Details
United States and Canada (UCAN) reported revenues of $2.98 billion, which rose 11.5% year over year and accounted for 44.8% of total revenues. ARPU grew 2% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 9.3% from the year-ago quarter to 73.94 million. The company added 0.86 million paid subscribers, up 56.4%year over year.
Europe, Middle East & Africa (EMEA) reported revenues of $2.14 billion, which surged 36.7% year over year and accounted for 32.2% of total revenues. ARPU grew 3% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 28.8% from the year-ago quarter to 66.70 million. The company added 4.46 million paid subscribers, up0.9% year over year.
Latin America’s (LATAM) revenues of $789 million increased 5.8% year over year, contributing 11.9% of total revenues. ARPU grew 4% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base rose 19.5% from the year-ago quarter to 37.54 million. The company added 1.21 million paid subscribers, down 40.7% year over year.
Asia Pacific’s (APAC) revenues of $685 million soared 63.9% year over year and accounted for 10.3% of total revenues. ARPU was flat year over year on a foreign-exchange neutral basis.
Paid-subscriber base jumped 57.1% from the year-ago quarter to 25.49 million. The company added 1.99 million paid subscribers, up13.7% year over year.
Content Details
Netflix’s fourth-quarter content slate included the new season of The Crown as well as Bridgerton and The Queen’s Gambit. Regional content included Barbarians (Germany), Sweet Home (Korean), Selena: The Series and Alice in Borderland (Japan).
Netflix released its original film The Midnight Sky in the reported quarter. Other movies included Over the Moon, We Can Be Heroes, Holidate and The Christmas Chronicles: Part Two.
Netflix’s first Portuguese language holiday film from Brazil, Just Another Christmas, was also a big hit in the reported quarter.
Markedly, Netflix plans to release at least one new original film every week in 2021. Netflix’s releases for the first quarter of 2021 include season 3 of Cobra Kai, Lupin as well as To All the Boys I’ve Loved Before 3, the finale of the trilogy.
Moreover, content portfolio includes Fate: The Winx Saga, Yes Day, Sky Rojo and Space Sweepers.
Operating Details
Marketing expenses declined 13.2% year over year to $762.6 million. As a percentage of revenues, marketing expenses decreased 460 basis points (bps) to 11.5%.
Moreover, consolidated operating income surged 108.1% year over year to $954.3 million, driven by higher-than-expected revenue and subscriber growth. Consolidated operating margin expanded 600 bps on a year-over-year basis to 14.4%.
Balance Sheet & Free Cash Flow
Netflix had $8.21 billion of cash and cash equivalents as of Dec 31, 2020, compared with $8.39billion as of Sep 30, 2020.
Long-term debt was $15.8 billion as of Dec 31, 2020, up from $15.5 billion as of Sep 30, 2020. Streaming content obligations were $19.2 billion, unchanged sequentially.
Netflix reported free cash outflow of $284 million against free cash outflow of $1.67 billion in the year-ago quarter.
Guidance
For the first quarter of 2021, Netflix forecasts earnings of $2.97 per share, indicating year-over-year growth of 89.2%.
Netflix expects to end the first quarter of 2021 with 209.66 million paid subscribers globally, indicating growth of 14.7% from the year-ago quarter.
Total revenues are anticipated to be $7.13 billion, suggesting growth of 23.6% year over year.
Operating margin is projected at 25% compared with 16.6% in the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 38.08% due to these changes.
VGM Scores
Currently, Netflix has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Netflix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Netflix (NFLX) Up 11.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Netflix (NFLX - Free Report) . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Netflix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Netflix Q4 Earnings Miss, User Growth Drives Top Line
Netflix reported fourth-quarter 2020 earnings of $1.19 per share, missing the Zacks Consensus Estimate by 13.8% and the company’s guidance of $1.35. Moreover, the figure decreased 18.4% year over year.
Revenues of $6.64 billion increased 21.5% year over year and also beat the consensus mark by 0.3%. Average revenue per membership was flat year over year both on a reported and foreign-exchange neutral basis.
The streaming giant added 8.51 million paid subscribers globally, which declined 2.9% year over year but beat its guidance of 6 million paid-subscriber addition.
At the end of the fourth quarter, Netflix had 203.66 million paid subscribers globally, up 21.9% from the year-ago quarter, beating management’s expectation of 201.15 million paid subscribers.
The strong growth reflects Netflix’s solid content portfolio amid growing competition from services launched by Apple, Disney, ViacomCBS, AT&T, Discovery and Comcast.
Notably, the company now expects paid net additions to be 6 million compared with the year-ago quarter’s 15.77 million for the first quarter of 2021, reflecting stiff competition.
Segmental Revenue Details
United States and Canada (UCAN) reported revenues of $2.98 billion, which rose 11.5% year over year and accounted for 44.8% of total revenues. ARPU grew 2% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 9.3% from the year-ago quarter to 73.94 million. The company added 0.86 million paid subscribers, up 56.4%year over year.
Europe, Middle East & Africa (EMEA) reported revenues of $2.14 billion, which surged 36.7% year over year and accounted for 32.2% of total revenues. ARPU grew 3% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 28.8% from the year-ago quarter to 66.70 million. The company added 4.46 million paid subscribers, up0.9% year over year.
Latin America’s (LATAM) revenues of $789 million increased 5.8% year over year, contributing 11.9% of total revenues. ARPU grew 4% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base rose 19.5% from the year-ago quarter to 37.54 million. The company added 1.21 million paid subscribers, down 40.7% year over year.
Asia Pacific’s (APAC) revenues of $685 million soared 63.9% year over year and accounted for 10.3% of total revenues. ARPU was flat year over year on a foreign-exchange neutral basis.
Paid-subscriber base jumped 57.1% from the year-ago quarter to 25.49 million. The company added 1.99 million paid subscribers, up13.7% year over year.
Content Details
Netflix’s fourth-quarter content slate included the new season of The Crown as well as Bridgerton and The Queen’s Gambit. Regional content included Barbarians (Germany), Sweet Home (Korean), Selena: The Series and Alice in Borderland (Japan).
Netflix released its original film The Midnight Sky in the reported quarter. Other movies included Over the Moon, We Can Be Heroes, Holidate and The Christmas Chronicles: Part Two.
Netflix’s first Portuguese language holiday film from Brazil, Just Another Christmas, was also a big hit in the reported quarter.
Markedly, Netflix plans to release at least one new original film every week in 2021. Netflix’s releases for the first quarter of 2021 include season 3 of Cobra Kai, Lupin as well as To All the Boys I’ve Loved Before 3, the finale of the trilogy.
Moreover, content portfolio includes Fate: The Winx Saga, Yes Day, Sky Rojo and Space Sweepers.
Operating Details
Marketing expenses declined 13.2% year over year to $762.6 million. As a percentage of revenues, marketing expenses decreased 460 basis points (bps) to 11.5%.
Moreover, consolidated operating income surged 108.1% year over year to $954.3 million, driven by higher-than-expected revenue and subscriber growth. Consolidated operating margin expanded 600 bps on a year-over-year basis to 14.4%.
Balance Sheet & Free Cash Flow
Netflix had $8.21 billion of cash and cash equivalents as of Dec 31, 2020, compared with $8.39billion as of Sep 30, 2020.
Long-term debt was $15.8 billion as of Dec 31, 2020, up from $15.5 billion as of Sep 30, 2020. Streaming content obligations were $19.2 billion, unchanged sequentially.
Netflix reported free cash outflow of $284 million against free cash outflow of $1.67 billion in the year-ago quarter.
Guidance
For the first quarter of 2021, Netflix forecasts earnings of $2.97 per share, indicating year-over-year growth of 89.2%.
Netflix expects to end the first quarter of 2021 with 209.66 million paid subscribers globally, indicating growth of 14.7% from the year-ago quarter.
Total revenues are anticipated to be $7.13 billion, suggesting growth of 23.6% year over year.
Operating margin is projected at 25% compared with 16.6% in the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 38.08% due to these changes.
VGM Scores
Currently, Netflix has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Netflix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.