Categories AlphaGraphs, Consumer, Earnings, Technology

Netflix shares drop after Q4 revenue miss estimates

In the fourth quarter, Netflix (NFLX) added 8.8 million paid subscribers around the world, surpassing its own projection of 7.6 million net additions. At the end of the fourth quarter, Netflix had 139.26 million paid subscribers, higher than its expectation of 138.02 subscribers.

The subscriber base expansion mostly happened outside the US. In the International markets, the company added 7.3 million, while in the US, it managed only 1.5 million.

Netflix fourth quarter 2018 earnings infographic

NFLX shares were down up to 5% during the after-market hours. The stock had gained 50% since hitting a bottom on December 24 as part of the broader tech sell-off.

Revenue and profits also surpassed street estimates during the quarter. Net income fell from 41 per share to 30 per share, still topping average analysts’ estimate of  24 cents per share.

Revenue jumped 27% to $4.18 billion, missing the street projection. Analysts had, on an average expected $4.21 billion. Total streaming revenue during the quarter was, meanwhile, in line with expectations at $4.1 billion.

The company’s cash position continued to deteriorate with free cash flow at the end of the quarter declining to $1.31 billion from $524 million a year ago. The company’s resolve to produce quality content – not just in English, but in numerous foreign languages as well – has resulted in a liquidity crisis.

To help improve the situation, the streaming giant had on Wednesday raised its monthly subscription prices in the US. The lowest plan rate will go from $8 to $9, the standard and most popular plan rate will increase by $2 to $13 and the premier plan will now cost $16 as opposed to the earlier rate of $14. Shares had jumped 6% on the news.

For the full Netflix earnings call transcript, click here.

For the first quarter of 2019, Netflix hopes to add 8.9 million subscribers, up 8% year-over-year.

Though Netflix continues to be a dominant force in the streaming space, investors remain concerned about how the market equations might change with the entry of some new players – primarily from Disney (DIS) and Apple (AAPL). Now that Netflix has raised its subscription fees, it gives the newer entrants a better chance to steer the agitated customers towards itself.

A quick look at analyst recommendations on Netflix (NFLX) stock

Earlier this month, the company appointed Spencer Neumann, a former Activision Blizzard (ATVI) executive, as its CFO. Neumann will be tasked with putting a cap on the cash outflow as well as keeping a tab on the company’s debt load.

 

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text 

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