Wall Street had high expectations Netflix (NASDAQ: NFLX) goes into the earnings message for the fourth quarter. The stock gained 50% after bottoming out during the recent market correction at the end of December. After a step on this scale, even a great financial report might not have been enough to push Netflix shares higher.
Netflix delivered all the important metrics. Let's take a look at some of the key processes and what they mean for the future of the company.
1. Sales continue to grow
Netflix increased sales in the last quarter to $ 4.187 billion. This is an increase of more than 27% over the previous year, but is slightly below the company's forecast of $ 4.199 billion and the analysts' consensus of $ 4.21 billion. Netflix pointed out that foreign currency headwinds had a negative impact on quarterly sales, as in the third quarter.
In addition, the average subscription price (ASP) increased by 3% year-on-year. Excluding the impact of exchange rates, international ASP grew by 6% year-on-year.
For the full year, revenue increased 35% to $ 15.8 billion compared to 2017. This growth is likely to continue in the coming months as the company has recently seen price increases and continued strong customer growth.
2. Subscriber growth accelerates
The most important indicator of Netflix's future success has always been subscriber growth. In October, the company forecasted 7.6 million new paying members worldwide for the fourth quarter. Netflix slightly outperformed its forecast, bringing in net paid additions of $ 8.84 million. The number of paid subscribers increased by 25.9% in 2018 to 24.2% in 2017, bringing the company's total paid streaming companies to 139.26 million.
To further reduce it, the number of paid international subscribers grew by 7.31 million in the last quarter. This is 42% more than in the fourth quarter of 2017. In the US, Netflix generated 1.53 million paid subscribers, compared to 1.47 million in the same quarter last year. It ended the quarter with 80.77 million international subscribers and 58.49 million members in the US.
3. Cash burn slows down
In its third quarter shareholder letter, Netflix said it may have peaked: "We expect FCF [free cash flow] will be closer to - $ 3 billion for the full year 2018 than - $ 4 billion. ... We currently see the negative FCF for next year as roughly unchanged this year. "
Netflix turned out to be in full swing as free cash flow of $ 3.02 billion was significantly lower than it expected in early 2018. The combination of slower liquidity and a growing customer base is likely to accelerate free cash flow the day the company becomes active.
Netflix maintains its cash burn estimate for 2019 and expects its negative FCF to remain roughly unchanged compared to 2018 and "will improve thereafter every year."
4 bird box was even bigger than we thought
Netflix caused a stir in late December when it tweeted, "Took off my blindfold this morning and found that there were already 45,037,125 Netflix accounts observed bird box - Best first 7 days for a Netflix movie! "The company has updated these numbers for its Virushit in its fourth quarter, and in the first four weeks of its release, 80 million member households - 57% of subscribers worldwide - have watched the movie with Susanne Bier-Film.
That was not the only blockbuster during the quarter. Netflix provided a behind-the-scenes look at a limited number of its programs. psychological thriller you and British drama sex education 40 million viewers were in the first four weeks since their premiere.
Netflix also has success with original content around the world. Spanish-language original elite had been seen by 20 million member households. bodyguardwhich was produced jointly with BBC One; infant, the second original series of the company from Italy; and The protectorTurkish novice viewer efforts have been seen by more than 10 million member households.
5. The competition is growing
Netflix does not seem to be disturbed by growing streaming competition. The company estimates that it accounts for 10% of total television time in the US, at around 100 million hours per day. (His share of mobile videos is even lower).
Netflix commented on the growing competition: "There are thousands of competitors in this highly fragmented market that consumers are trying to entertain ... Our focus is not on the Disney+ Amazonor others, but how we can improve our experience for our members. "
The biggest entry is that the growth story of Netflix continues unabated. There will be quarters in which customer growth is below (or above) expectations. Revenues can be affected by headwinds in foreign currency (or tailwind). and some programs will be flops (or hits). However, the general trend is up and to the right, and Netflix continues to follow a path that others must follow.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Danny Vena owns shares in Amazon, Netflix and Walt Disney and has been calling Walt Disney for a long time in January 2019 for $ 85. The Motley Fool owns shares from Amazon, Netflix and Walt Disney and recommends them. The Motley Fool has a disclosure policy.