What’s the outlook as Netflix delivers substantial Q1 subscriber beat?
We examine the impact Covid-19 has had on some of Netflix’s key first quarter performance metrics.
Netflix share price volatile in after-hours trade
According to Bloomberg, prior to the release of Netflix’s latest quarterly results, analysts were estimating that the streaming giant would add approximately 8.47 million new paid subscribers in Q1.
On 21 April, GMT-4, Netflix delivered a solid beat on those estimates, revealing it had added 15.77 million new paid subscribers during the first quarter of 2020.
The catalyst behind this surge in subscribers, as Netflix described is a relatively straight forward one: with substantially more people staying at home due to the coronavirus (Covid-19) pandemic, many look to have turned to Netflix as a key source of entertainment.
Will this trend continue though?
Netflix’s management appears doubtful. Indeed, as it stands, the company is forecasting modest Q2 paid subscriber growth of 7.5 million – which would take Netflix’s total paid subscriber-base to a staggering 190 million.
Yet this figure, due to the uncertainty surrounding the current Covid-19 situation, has been described as ‘mostly guesswork’.
‘The actual Q2 numbers could end up well below or well above that, depending on many factors including when people can go back to their social lives in various countries and how much people take a break from television after the lockdown,’ the company flagged.
Interestingly, although the Netflix share price initially spiked in after-hours trade, optimism quickly eased off.
As of 7:59 pm GMT-4, Netflix traded at US$434.40 per share.
Currency fluctuations weigh on top-line growth
Mind you, though the streaming giant delivered a substantial subscriber beat in the latest quarter – its Q1 revenue came in-line with guidance – as many international currencies have depreciated in value over the last few months.
This, as the company noted, ‘creates a drag on international revenue growth.’
To illustrate that point, Netflix’s standard plan in Brazil, which last year would yield the company US$8.5 per subscriber now only yields the company US$6.5 per subscriber – based on current FX rates. Problematically, this creates a ‘~25% decline in US dollar average subscription price from Brazil, which offsets strong membership growth.’
All up, this saw Netflix post Q1 revenue figures of US$5,768 million – representing year-over-year (YoY) growth of 27.6%.
Netflix is currently forecasting that its Q2 revenue will come in at US$6,048 million, implying a year-over-year growth rate of 22.8%.
The streaming giant also reported Q1 net income of US$709 million, diluted EPS of US$1.57 and free cash flow (FCF) of US$162 million.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
