Netflix blows away new subscriber expectations

Earnings

Reed Hastings attends Reed Hastings panel during Netflix ‘See What’s Next’ event at Villa Miani on April 18, 2018 in Rome, Italy.

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Netflix is set to report its Q1 2020 earnings after the bell on Tuesday. The company has seen its stock outperform the market during the coronavirus pandemic as stay-at-home orders have given many consumers more time to explore streaming services.

Here is what Netflix reported:

  • Earnings per share (EPS): $1.57
  • Revenue: $5.77 billion

Wall Street is anticipating earnings per share of $1.65 on revenue of $5.76 billion, based on Refinitiv consensus estimates. Domestic (U.S. and Canada) paid subscriber additions is expected to come in at 775,000 and international paid subscriber additions is expected to be 7.2 million, according to FactSet. However, it’s difficult to compare reported earnings to analyst estimates for Netflix’s first quarter, as the impact of the coronavirus pandemic on earnings is complicated to assess.

Netflix has ranked among analysts’ favorite “stay at home” stocks as more of the world’s workforce has been pushed out of office buildings in an attempt to stem the spread of the virus. Netflix’s new series “Tiger King” has become the subject of countless memes and Zoom happy hours, providing an outlet for many viewers under new restrictions.

Goldman Sachs analysts expect Netflix to significantly outperform its first quarter revenue guidance. Goldman predicted last week that Netflix would report over 10 million new paid subscribers for the quarter, ahead of its guidance of 7 million.

“Content additions to the platform, combined with the value of Netflix’s library to those staying home during the COVID-19 crisis, drove this outperformance, more than offsetting the lingering impact of last year’s price increase and growing competition in SVOD,” according to the Goldman analysts. “More importantly, we believe the COVID-19 crisis is accelerating the shift from traditional content viewership (linear TV, theaters, etc) to streaming services.”

But Needham analysts predicted the uptick for Netflix could be short-lived as more consumers experience layoffs and pay-cuts, forcing them to tighten their budgets.

But Netflix now has plenty of other streaming services to compete with for viewers’ attention and several of them start at lower monthly fees. Disney‘s new streaming service, for example, costs $6.99 per month while Netflix’s most basic standard definition plan costs $8.99 per month. AT&T’s WarnerMedia announced Tuesday morning that its new streaming service, HBO Max, will launch on May 27 for $14.99 per month, but it will be free for many current AT&T customers.

This story is developing. Check back for updates.

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