Netflix (NFLX) Provides Positive Outlook on Subscriptions After Delivering Q4 Results Above Consensus
By:NewsyStocks   Wednesday, January 25, 2022 6:24 PM



Netflix Inc. (NFLX), provider of subscription based Internet services for TV shows and movies, delivered better than expected results for the fourth quarter thereby retrieving part of lost ground to regain investors confidence. The stock reacted favorably to the company's news by soaring more than 10 percent in the extended hours trading.

The company's results come on the backdrop of a price increase that had resulted in loss of about 800 thousand subscribers during the summer. This has also impacted its year-over-year earnings unfavorably by 13.5 percent.

During the fourth quarter, Netflix could add 606 thousand subscribers compared to a loss of 805 thousand in the third quarter thus reversing the trend in quick time. Total subscribers base stood at 24.395 million at the end of fourth quarter compared to 23.789 million at the end of third quarter.

Q4 Results

The Los Gatos, California-based company reported net income of $40.73 million, down 13.5 percent from $47.1 million and earnings slipped 16 percent to 73 cents a share from 87 cents a share in the year-ago quarter.

Total revenues increased 47percent to $875.58 million from $595.92 million in the previous year quarter.

Wall Street analysts were expecting Netflix to deliver earnings of 55 cents a share on revenues of $857.89 million.

The company's gross margin slacked to 34.3 percent from 34.4 percent in the year-ago quarter and slipped from 34.7 percent in the third quarter. Similarly, net margin skid to 4.7 percent from 7.9 percent in last year and from 7.6 percent in third quarter. The company had to spend marketing and technology development 13.1 percent and 9.2 percent of revenues compared to 10.5 percent and 7.7 percent respectively in previous year quarter.

Outlook

Going forward, Neflix is projecting a loss of $27 - $9 million or loss per share of 49 cents – 16 cents for the first quarter. This is on the strength of total subscriptions to be 22.8 – 23.6 million for domestic streaming, while international streaming is targeted between 2.5 – 3.1 million. The revenues are guided in the range of $496 - $511 million for the domestic regions, whereas international region is expected to contribute $38 - $44 million for the same period.

On the Domestic DVD space, Netflix expects total subscriptions to be 9.4 – 10.0 million with revenue in the range of $308 - $322 million for the first quarter.

Street analysts are predicting the company to suffer a loss of 30 cents a share on revenues of $847.81 million for the first quarter.

Our Take

The company seems to have recovered a part of its lost ground. The stock witnessed 52-week high of $304.79 earlier in 2011. Though margins remain a concern, subscribers' addition is very important in this field and Netflix aims to do that. If the company could achieve its planned additions, the stock is bound to witness upside.


 

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