Netflix Stock Is Dropping After Earnings Because Wall Street Was Way Too Optimistic

[dasara_bullodu1]

Netflix shares are falling in late trading after the streaming video giant posted September quarter subscriber growth that fell short of both guidance and Wall Street expectations.

Netflix (ticker: NFLX) added 2.2 million net new subscribers in the quarter, below the company’s forecast of 2.5 million, and well below recent Wall Street estimates which in some cases topped 5 million. Revenues in the quarter were $6.4 billion, a little ahead of guidance at $6.3 billion but in line with Street estimates.

Profits were $1.74 a share, below both guidance at $2.09 a share and consensus at $2.13 a share, a miss the company blamed entirely on a $249 million noncash unrealized loss related to “foreign exchange remeasurement” on euro denominated debt.

For the December quarter, the company is projecting revenue of $6.6 billion and profits of $1.35 a share; Street consensus has been $6.6 billion and 94 cents a share. The company sees fourth-quarter net adds rebounding to 6 million.

In late trading, Netflix shares were down 5.6%, to $496.00.

Netflix expects fourth-quarter operating margin of 13.5%, versus 8.4% a year ago. The company said it would post full-year operating margin of 18%, beating its original full year margin target of 16% by two points, and up 500 basis points year over year.

The company said that it believes the slower subscriber growth in the quarter—which was down from 10.1 million in the June quarter and 15.8 million in the March quarter—was “primarily due to our record first half results and the pull-forward effect” the company laid out in each of the two previous quarters.

The company notes that it has now added 28.1 million paid subscribers for the year to date, more than the 27.8 million added in all of 2019. The company notes that if it hits the 6 million target for the fourth quarter, the annual total will be 34 million, ahead of the previous record high of 28.6 million in 2018

In a letter to shareholders, Netflix said that while “the state of the pandemic and its impact continues to make projections very uncertain,” the company believes that as the world recovers in 2021, “our growth will revert back to levels similar to pre-Covid.”

The company thinks that net adds are likely to be down year-over-year in the 2021 first half compared with the big spikes in the 2020 first half. “We continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service,” Netflix said in the letter.

 

The company also said it has returned to production not just in Europe and Asia but also in Latin American and the U.S. and Canada. “We’ve restarted production on some of our biggest titles including season four of Stranger Things, action film Red Notice (starring Dwayne Johnson, Gal Gadot, and Ryan Reynolds), and The Witcher season two,” the company said. “Since the almost-global shutdown of production back in mid-March, we have already completed principal photography on 50+ productions and, while the course and impact of [Covid-19] remains unpredictable, we’re optimistic we will complete shooting on over 150 other productions by year-end.”

The company added that it continues to expect the number of Netflix originals to be up year over year in each quarter of 2021.

Netflix posted free cash flow of $1.1 billion in the quarter, up from $899 million in the June quarter. Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, was $1.45 billion down a hair from $1.49 billion in June. Average streaming paid memberships were up 25% from a year ago. Average revenue per user was down 1.6% as reported, but 1% adjusted for currency. Operating margin was 20%, up 170 basis points year-over-year.

The company added that as productions restart, it expects slightly negative free cash flow in the fourth quarter. For the full year, the company expects $2 billion in free cash flow, up from a previous forecast of break-even to slightly positive.

“This change is due primarily to our higher operating margin expectation for 2020 and the timing of cash spending on content,” the company said. “We expect our [free cash flow] profile over the coming years to continue to improve as we increase our profitability and our transition to the production of Netflix originals (which requires more cash upfront versus second run content) matures.”

The company said that for 2021, it expects free cash flow to range from a $1 billion loss to break even. “With $8.4 billion in cash on our balance sheet at the end of the quarter plus our $750 million credit facility (which is undrawn), our need for external financing is diminishing,” the company said. “As indicated last quarter, we don’t have plans to access the capital markets this year.”

[dasara_bullodu1]

Assam

[Vallavan]

malli 550 raada aithe

[dasara_bullodu1]

Just now, Vallavan said:

malli 550 raada aithe

it will go picha lite

[Spartan]

6 minutes ago, Vallavan said:

malli 550 raada aithe

@Vaampire  600 annaru target...repu lestadi.

[Anta Assamey]

[Vaampire]

1 hour ago, Spartan said:

@Vaampire  600 annaru target...repu lestadi.

Nenu follow avvadam ledhu netflix ni

[Vallavan]

ee roju report baga ledu.. 

[Yaman02]

[sri_india]

ER tharuvatha drop kavadam Netflix ki emina kotha???? Nothing gonna change for netflix , in a week or two , malli back ki vosthadi 

[Hitman]

Own membership లు తగ్గిపోయి, Friend ది, లేక పోతే Friend Friend ది వాడడం ఎక్కువ అయ్యింది.. Basically House Full Collection Nill అయ్యింది 

[megadheera]

I think cuties series effect anukunta. Chala mandi unsubscribe ayyaru

[modi_bhakth]

@netflix has bright future