Netflix Inc. surpassed 200 million streaming subscribers for the first time by the end of 2020 as recordings rose again, despite higher prices in the US and Canada.
Tuesday Afternoon, Netflix NFLX,
reported 8.5 million new net subscribers in the fourth quarter, a dramatic increase from the 2.2 million reported in the previous quarter and well ahead of Netflix and analysts’ estimates. Netflix attracted 25.9 million new subscribers in the first half of the year as COVID-19 pandemic shelter orders spread globally, with a net annual gain of 36.6 million subscribers. , up to 203.7 million in total.
This performance led to Netflix’s revenue growth of $ 25 billion for the first time, and profit increased 48% for the full year. Managers have given investors special treatment after the big gains, telling them they expect the money generated by the company to reliably fund day-to-day operations, after years of using massive debt to fund its growing library of content. video.
The news sent Netflix shares up more than 10% during after-hours trading on Tuesday, despite lower-than-expected profits. After large gains on growth in early 2020, Netflix shares calmed down in the second half of the year and fell by more than 5% in the last three months.
Streaming service no. 1 reported fourth-quarter net income of $ 542 million, or $ 1.19 per share, compared to net income of $ 1.30 per share last quarter. Revenue improved to $ 6.64 billion from $ 5.47 billion a year ago. Analysts surveyed by FactSet expected adjusted earnings of $ 1.36 per share from $ 6.6 billion in sales.
After Netflix reported modest gains in the third quarter, they feared that demand for Netflix had cooled amid intensified competition and content from the Walt Disney Co. DIS genre.
Disney + and Hulu, Apple Inc.’s AAPL,
Apple TV +, T&T Inc.,
HBO Max, AMZN Amazon.com Inc.,
Prime Video and CMCSA Comcast Corp.,
Peacock.
“The high growth of live entertainment has led old competitors such as Disney, WarnerMedia and Discovery to compete with us in new ways that we have been waiting for for many years,” the directors wrote in a letter to shareholders on Tuesday. “This is partly why we have moved so fast to grow and further consolidate our original content library across a wide range of genres and nations.”
Netflix has used massive amounts of debt to fund content creation, but executives said in the letter that “we think we’re very close to being sustainable. [free-cash-flow] positive ”, and in bold only a fragment of text throughout the letter.
“We believe that we no longer need to raise external funding for our day-to-day operations,” the letter reads.
Netflix began raising the price of popular streaming levels in the US and Canada late last year as a way to counter any slow subscriber growth. Directors predict that Netflix will attract a net number of 6 million new subscribers in the first quarter of the year, which would represent a massive decline from over 15 million who registered as COVID-19 spread worldwide in the first quarter of year 2020.
While executives did not provide annual guidance for adding subscriptions, they said the increase in operating margin would slow, a signal that they expect not to add as many subscribers as possible in 2021. After the gross margin increased by 5 percentage points to 18% in 2020, they expect a more modest increase of about 2 percentage points, to 20% this year.
“We intend to further increase our operating margin each year, at an average rate of 3 percentage points per year, in any period of several years, but we anticipate some weight,” the directors wrote. “In a few years we will be a little over (as in 2020), a few years a little under (as in 2021).”
Netflix shares have risen 47% in the past 12 months, while the S&P 500 SPX,
increased by 13%.