Netflix Slips As Soft Subscriber Guidance Offsets Oscar-Driven Q4 Earnings Beat

Netflix said its non-US subscriber base passed the 100 million mark last quarter, as global additions topped Wall Street forecasts despite ramped-up challenges from rivals such as Apple, Disney and Comcast.

Netflix Inc.  (NFLX) - Get Report shares were indicated lower in pre-market trading after it posted stronger-than-expected fourth quarter earnings, but forecast softer near-term global subscriber growth as rivals such as Disney  (DIS) - Get Report and Apple  (AAPL) - Get Report ramp-up their challenges in the entertainment streaming market.

Netflix said earnings for the three months ending in December came in at $1.30 per share, smashing the Street consensus forecast and four times higher than the same period last year. Group revenues, Netflix said, rose 30.5% from last year to $5.467 billion, just ahead of analysts' forecasts of a $5.45 billion tally.

Netflix also said its international subscriber base rose past the 100 million mark for the first time, with paid additions rising by 8.76 million in the quarter, topping the Refinitiv forecast of 7.63 million. Around 420,000 new subscribers were added to its U.S. service, the company said, as new entrants such as Disney, Apple and Comcast  (CMCSA) - Get Report added to further competitive pressures in the domestic market.

"The great thing is, first off, we're growing in Q4 including in the US even with some of those noise from competitive launches," CEO Reed Hastings told investors on a conference call late Tuesday. "And ultimately what drives our business is increasing member satisfaction and viewing." 

"And what you also see in the US, what we saw across the board is that our viewing, our per membership viewing grew not just globally, but in the US through Q4 and continues," he added. "So that bodes well for our long-term opportunity as long as we keep getting better."

Netflix shares were marked 2.9% lower in early trading Wednesday to change hands at $328.45 each, a move that trim the stock's six-month gain to around 9%.

Netflix said it expects to add 7 million global subscribers across its 190 markets over the first three months of this year, trailing Wall Street forecasts of an 8.82 million total. Standard U.S. plan costs will remain fixed at $13 per month.  

Earlier this month, Netflix topped Disney with twenty four Oscar nominations and received a price target boost from analyst at Goldman Sachs.

"The Irishman", Netflix's blockbuster production from iconic director Martin Scorsese, as well as its divorce dram 'Marriage Story', were named as two of the seven films that will compete for the Academy of Motion Picture Arts and Sciences coveted Best Picture honor next month in Los Angeles. 

The nods topped a list of 23 other nominations for the world's biggest entertainment streaming service, one ahead of Disney, which launched its rival Disney-Plus offering late last year

"In another highly anticipated quarterly report against the backdrop of competitor launches (Disney+ and Apple TV+) fueled by major promotional discounts Netflix overall delivered with 4Q subscriber results above even our street high expectations, subscriber guidance for 1H 2020 in-line with consensus expectations and ’20 free cash losses $800 million better than our expectations," said Pivotal Research analyst Jeffrey Wlodarczak, who carries a $425 price target with a 'buy' rating on Netflix stock.

"The bottom line is despite a material rise in supposed competition, the natural increase in absolute churn on a materially larger subscriber base and very healthy y/y increases in (average revenue per user) in all of their territories (constant currency) other than (Asia Pacific) Netflix did not see a much of a material overall net new subscriber slowdown y/y which we view as fundamentally quite positive."