By Jon Swartz
Netflix Inc. on Tuesday reported a bump in revenue and global net subscriber growth to end 2019 on a strong note, but offered a weak outlook for the start of 2020, raising concerns about its dominance in an increasingly crowded field.
The fourth-quarter results, announced after the market’s close, initially sent Netflix shares /zigman2/quotes/202353025/composite NFLX -2.34% down 1.5% in after-hours trading before they rebounded to a current 2.3% gain.
In a letter to shareholders, Netflix executives noted, “For Q1’20, we forecast global paid net adds of 7.0m vs. 9.6m in Q1’19, which was an all-time high in quarterly paid net adds. Our Q1’20 forecast reflects the continued, slightly elevated churn levels we are seeing in the US plus an expectation for more balanced paid net adds across Q1 and Q2 this year.”
During a video conference question-and-answer session, Netflix Chief Financial Officer Spencer Neumann acknowledged “some elevated churn from pricing and competition.”
The Silicon Valley company reported the addition of 8.76 million paid subscribers globally in the fourth quarter, 550,000 of them in the U.S. (420,000) and Canada. Analysts were looking for global paid streaming subscriber additions of 7.9 million, according to FactSet, on domestic additions of 623,000 and 7.2 million internationally. Netflix reported 8.84 million new paid streaming subscribers in the year-ago quarter.
But it offered a first-quarter revenue outlook of $5.73 billion, which is on par with FactSet estimates, and global paid subscriber additions of 7 million vs. the 8.9 million forecast by FactSet, indicating it can no longer expect strong domestic growth.
Netflix faces competition from some of the world’s biggest media companies: Apple Inc.’s /zigman2/quotes/202934861/composite AAPL -3.39% Apple TV+, Walt Disney Co.’s /zigman2/quotes/203410047/composite DIS -3.62% Disney+, Amazon.com Inc.’s /zigman2/quotes/210331248/composite AMZN -1.82% Amazon Prime Video, and Viacom Inc.’s /zigman2/quotes/209148061/delayed AR:VIAB 0.00% CBS All Access. Last week, Comcast Corp. /zigman2/quotes/209472081/composite CMCSA -3.21% unpacked Peacock, due in April for Comcast customers and July for everyone else. AT&T Inc. /zigman2/quotes/203165245/composite T -1.84% is expected to launch HBO Max in May.
Netflix Chief Executive Reed Hastings downplayed the Disney threat during the video Q&A, insisting its “great linear content” is taking away viewers from broadcast TV.
Netflix reported fourth-quarter net income of $587 million, or earnings of $1.30 a share, compared with $134 million, or 30 cents a share, in the year-ago period. (The company benefitted from a $438 million tax benefit in Q4.) Revenue grew 30% to $5.47 billion from $4.2 billion in the year-ago period. Analysts surveyed by FactSet had estimated 52 cents a share on revenue of $5.45 billion.
Netflix stock is flat over the past 12 months, with the S&P 500 index /zigman2/quotes/210599714/realtime SPX -3.03% gaining 24%.