Netflix Misses the Mark On U.S. Subscriber Growth

During Q4, Netflix beats earnings estimates but falls short on U.S. subscribers.

Shares of Netflix are rebounding after the company announced it fell short on subscriber growth during the fourth quarter. The company released its most recent earnings report on Wednesday, and the results weren’t what investors were hoping to see.

Netflix topped earnings and revenue estimates, but its subscriber growth in the U.S. missed the mark. Let’s take a look at what happened to Netflix during the fourth quarter.

Netflix misses Q4 subscriber growth

Netflix has been under the microscope ever since Disney and Apple announced plans to launch their own streaming services. Analysts have been debating whether the company will be able to withstand increased competition in the coming years.

The fourth-quarter earnings report is the first one the company has released since the highly successful launch of Disney+ in November. And it wasn’t all bad news for Netflix.

The company beat revenue and earnings estimates during the fourth quarter. In particular, the company reported earnings of $1.30 per share, crushing previous estimates of $0.53 per share. That means Netflix’s full-year earnings were up more than 50% from a year earlier.

And globally, Netflix beat its own forecasts for subscriber growth. The company added 8.76 million subscribers during the fourth quarter, beating estimates of 7.6 million. 

However, most of the company’s subscriber growth was outside of the U.S. Domestically, Netflix fell short on its subscriber growth. The company added 420,000 new U.S. customers, missing estimates of 600,000.

Not to mention, Netflix continues to burn through cash at a rapid pace. In 2019, the company’s free cash flow hit negative $3.3 billion. The company expects to reduce this loss to $2.5 billion in 2020. 

What does this mean for Netflix?

The latest earnings report indicates that Netflix has been affected by the increased competition in the streaming market. And in March, Disney+ launches in European markets. So it will be interesting to see what effect that has on Netflix’s global subscriber growth. 

But overall, Wall Street is still pretty bullish when it comes to Netflix stock. Out of the 33 analysts currently reviewing the stock, only four recommend selling. And just two days after releasing the earnings report, the company’s shares are up by more than 15%.