Netflix beats expectations – Netflix stock shoots to record high despite subdued outlook

Starke Zahlen: Netflix schlägt die Erwartungen - Netflix-Aktie schießt trotz verhaltenem Ausblick auf Rekordhoch | Nachricht |
Netflix performing very strongly

The streaming provider Netflix has presented its financial statements for the past fiscal quarter.

The online video service Netflix grew strongly at the end of the year thanks to series hits such as “The Queen’s Gambit,” “Bridgerton” and “The Crown” despite tougher competition. In the three months to the end of December, the number of paying subscribers rose by 8.5 million to just under 204 million, Netflix announced Tuesday after the U.S. stock market closed. This was the first time the 200 million user mark was cracked. The figures significantly exceeded its own forecast and analysts’ expectations.
Revenues increased by more than 20 percent year-on-year to $6.6 billion. Profits, meanwhile, were slightly lower than a year ago at $542 million (447 million euros). Netflix is making heavy investments to fight off financially strong competitors who want to steal customers away from the streaming market leader with newer video services. Disney+, for example, is experiencing very strong growth, but other services such as HBO Max and Peacock are also putting Netflix under pressure alongside more established rivals such as Amazon Prime and Hulu. They are all benefiting from the streaming boom due to the Corona crisis.

Even though the letter to shareholders said 2020 had been an “incredibly difficult year,” Netflix was undoubtedly among the big winners. The fact that movie theaters remained closed due to the pandemic and many people were stuck at home gave the company a huge increase in customers. Overall, Netflix gained a record 37 million new subscriptions – thanks in part to the hype surrounding the series “Tiger King” – and increased revenue by almost a quarter to around $25 billion. Operating profit even shot up by 76 percent to 4.6 billion dollars.
The outlook for the current first quarter was relatively restrained, Netflix puts an increase of six million to just under 210 million users in prospect. Most analysts had expected a higher forecast here. By comparison, the streaming service Disney+ of the Hollywood giant of the same name, which is considered the biggest rival in perspective, has already gained over 86.8 million users since its launch in November 2019 and is so far only available in far fewer countries than Netflix. However, Disney also helped out with heavy discounts and special offers.

Netflix stock at record high – strong numbers and share buybacks
After convincing quarterly figures from Netflix, the shares soared to a record high of 593.29 US dollars on Wednesday. The previous high they had reached in mid-June last year with more than 575 dollars. At the close of trading Wednesday, one Netflix share still cost $586.34, up 16.85 percent from the previous day.
The company grew strongly at the end of the year thanks to hit series like “The Queen’s Gambit,” “Bridgerton” and “The Crown” and despite increased competition. The business figures significantly exceeded the company’s own forecast and analysts’ expectations. In terms of the number of paying subscribers, the company broke the 200 million mark.
But the driver for the share price is also likely to be management’s announcement that it is considering share buybacks for the first time since 2011. “While Walt Disney is suspending its dividend, Netflix is preparing for share buybacks,” wrote analyst Todd of Bernstein Research, taking a side swipe at its rival in the streaming business. Netflix is likely to hold five billion dollars in liquidity, the expert estimated.
It is becoming apparent that consumers are willing to subscribe to multiple streaming services at the same time and that they are not substituting for each other, wrote analyst Manuel Mühl of DZ Bank. Experts at Swiss bank Credit Suisse added: “With the announcement of share buybacks starting in the second half of 2021, Netflix has put the final nail in the coffin of stock market bears.”
From October 2019 to July 2020, Netflix’s share price had more than doubled. More and more customers subscribed to the series producer’s offerings during this period. Subsequently, the price oscillated under strong fluctuations between 460 and good 570 up and down. Now, the company may have achieved a breakthrough on the way up. The stock market value of the California-based company has risen to over 250 billion dollars as a result of the share price rally.

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