Netflix Jumps on Stronger-Than-Expected Subscriber Growth

Netflix added more paid subscribers than expected and said it would no longer need to borrow money.
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Shares of Netflix  (NFLX) - Get Report jumped after hours Tuesday after the video streaming service added more paid subscribers than expected in the fourth quarter and guided for 2021 free cash flow to be "around break even." 

Netflix added 8.51 million paid net subscribers in Q4, ahead of guidance of 6 million net adds and consensus estimates of 6.19 million.

The company reported revenue of $6.64 billion, a 21.5% increase over the same year last year, while earnings per share were $1.19 per share. Analysts were expecting Netflix to report revenue of $6.63 billion with earnings of $1.39 per share.

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"We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business," the company said in its earnings release. 

Netflix shares rose 11.3% to $558.25 after-hours following the release of the report. 

After many years of being cash flow negative and needing to borrow money to fund its operations, Netflix said that its improved cash position meant it would no longer need to borrow money.

"Combined with our $8.2 billion cash balance and our $750 million undrawn credit facility, we believe we no longer have a need to raise external financing for our day-to-day operations," the company said.

For the first quarter, Netflix expects revenue of $7.129 billion with earnings of $2.97 per share. Wall Street is expecting revenue of $7.02 billion on earnings of $2.10 per share. 

Netflix closed the quarter with a 23% bump in paid subscriptions to 203.7 million, on its way to adding 37 million paid additions in 2020. More than 80% of those net adds came from out of the U.S./Canada region. 

The U.S./Canada region led the company with $2.98 billion in revenue in the fourth quarter, followed by Europe, Middle East and Africa, which reported $2.137 billion in revenue. 

The company reported growing its operating margin by 5% in 2020 to 18% with expectations of a 20% operating margin for 2021. 

"It’s a great time to be a consumer of entertainment. There are a wealth of options ranging from linear TV to video gaming to user generated content on YouTube and TikTok. We continue to work hard to grow our small share of screen time against these major competitors," Netflix said.