Netflix posted fourth-quarter results above analyst estimates and reported positive cash flow for the year. The company said it did not need loans and could afford to buy back shares while continuing to actively invest in growth opportunities.
Netflix (NFLX) shares, up 47.7% in the past 12 months, surged on Tuesday after the streaming video giant released its fourth quarter and full-year results for the company.
Although the COVID-19 pandemic has brought film production to a halt for nearly three quarters, demand for streaming entertainment services has grown globally, driving the growth of both Netflix and its competitors Disney (DIS), Apple (AAPL) TV +, WarnerMedia’s HBO Max. AT&T) and Peacock from NBCUniversal.
Netflix Q4 2020 Results
Earnings per share were $ 1.19, which is $ 0.19 worse than analysts’ estimate of $ 1.38 and 8% below last year’s value.
Revenue rose 21% to $ 6.64 billion, up from the Wall Street average estimate of $ 6.6 billion. Netflix’s quarterly revenue and earnings statistics for the last 2 years are available here.
Netflix reported that it had 8.5 million new global paid subscribers for the past quarter, up from an expected 6.47 million.
Netflix’s new global paid subscribers for the entire 2020 grew 31% to 37 million, up from 28 million in 2019. According to a press release from Netflix, EMEA (Europe, Middle East and Africa) accounted for 41% of new paid subscribers for the full year, APAC (Asia Pacific) was the second-largest source of growth of 9.3 million for the year (growth 65% more than last year).
Forward-looking statements from Netflix
Netflix predicts first-quarter 2021 revenues of $ 7.13 billion (23.6% growth projected over Q1 2020), and EPS will grow 90% to $ 2.97, with quarterly earnings will amount to $ 1.36 billion (almost twice as much as a year earlier). Analyst Forecast: Netflix Q1 earnings of $ 2.10 on revenue of $ 7.02 billion.
Netflix plans to add 6 million new subscribers worldwide in the current quarter, indicating a slowdown in addition growth.
Netflix “close to consistently positive free cash flow”
Netflix expects FY2021 to increase its operating margin by 20%, up 2% from 2020 and above the previous forecast of 19%, due to a more favorable revenue forecast.
Netflix said that after years of negative cash flow and having to borrow money to fund its operations, it will no longer need to borrow money.
Netflix posted a negative free cash flow (FCF) of $ 284 million in Q4, but FCF for the whole of 2020 was positive at $ 1.9 billion, up from a negative $ 3.3 billion in 2019.
Netflix’s expected FCF for the full year of 2021 will be roughly breakeven.
“Combined with our $ 8.2 billion in cash balance and $ 750 million of unused credit, we believe we no longer need to raise outside funding for our day to day operations,” the company said.
Netflix chief financial officer Spencer Neumann said the company (for the first time since 2011) is planning a share buyback as an opportunity to return cash to shareholders.
That said, Netflix is not giving up on a bold investment as it plans to release more than 500 films, TV series and shows that are currently in post-production or “preparing to launch”.
On January 12, Netflix posted a huge list of 71 titles in 2021 on its website – with plans to release at least one new movie every week of the year.