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While Netflix managed to add fewer than expected subscribers during Q3 2020, it still clocked a higher-than-expected revenue. The Asia Pacific region contributed to a large subscribers’ addition during the last quarter.
Post the market hours on Tuesday, October 20, media streaming giant Netflix Inc (NASDAQ: NFLX) reported its Q3 2020 earnings. The quarterly numbers are short of analysts’ estimates with a drop in global paid subscriber and EPS. However, it still managed to exceed market expectations on revenue.
Netflix reported an addition of 2.20 million paid net subscribers against the expected 3.57 million in Q3. Besides, the company reported an EPS of $1.74 against the expected $2.14. As said earlier, it managed to clock a higher-than-expected revenue of $6.44 billion. In its letter to shareholders, Netflix said that it added nearly 6.8 million paid subscribers worldwide throughout the period of the coronavirus global pandemic. It also noted that the slower subscriber growth rate in the last quarter is in line with the company’s expectations.
Netflix Vice President of Investor Relations Spencer Wang said that investors shouldn’t focus too much on the subscribers’ numbers. He added:
“We just really don’t over-focus on any 90-day period. And just to give you an example, if the quarter was 48 hours longer, we would have come in slightly above our guidance forecast.”
Netflix said that it saw a huge surge in subscribers from the Asia-Pacific region. The region alone contributed 46% to the total addition of the global net paid subscribers. Also, the letter to the shareholders states:
“We’re pleased with the progress we’re making in this region and, in particular, that we’ve achieved double digit penetration of broadband homes in both South Korea and Japan”.
Netflix Stock Price Tanks Nearly 6% after Q3 Report with Weaker Q4 Outlook
Netflix has also shared the forecast for the fourth-quarter outlook. The company expects the addition of 6 million paid net subscribers. This will be still less than the 8.8 million subscribers it added during Q4 2020.
Shares of Netflix (NFLX) tanked 5.71% on Tuesday in after-hours trading. Netflix remains as one of the good performing shares with 60% returns year-to-date. In the letter, the company wrote:
“The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID”.
The good thing is that the company is net cash flow positive for the third consecutive quarter. It expects to be free cash flow positive by $2 for the whole of 2020. Netflix said that it expects the release of more originals during each quarter of 2021. It has already started production of the next seasons for a few of its popular originals like Stranger Things, Red Notice, The Witcher.