Netflix Inc. it surpassed 200 million streaming subscribers for the first time by the end of 2020, as records increased once again despite higher prices in the United States and Canada.
Tuesday afternoon, Netflix NFLX,
it recorded 8.5 million new net subscribers in its fourth quarter, a dramatic rise from 2.2 million in the previous quarter and well ahead of estimates by Netflix and analysts. Netflix attracted 25.9 million new subscribers during the first half of the year, as host orders related to the COVID-19 pandemic spread worldwide, with an annual net profit of 36.6 million subscribers, to 203.7 million in total.
This performance caused Netflix’s revenue to increase to $ 25 billion for the first time and profit to increase by 48% year-round. Executives gave special pleasure to investors after the big gains, telling them they hoped the cash generated by the company would be able to reliably fund day-to-day operations, after years of using debt. Massive to Fund Your Growing Video Content Library
The news sent Netflix shares more than 10% in after-hours trading on Tuesday, although profits were lower than expected. After large gains in the midst of early 2020, Netflix shares had calmed down during the second half of the year and were down more than 5% in the last three months.
The transmission service no. 1 reported fourth-quarter net income of $ 542 million, or $ 1.19 per share, compared to net income of $ 1.30 per share in the prior year quarter. Revenue improved to $ 6.646 billion, from $ 5.477 billion years ago. Analysts surveyed by FactSet expected adjusted earnings of $ 1.36 per share on sales of $ 6.6 billion.
After Netflix reported modest gains in the third quarter, there were fears that Netflix demand would cool amid intensified competition and content, such as Walt Disney Co.’s DIS.
Disney + and Hulu, Apple’s AAPL Inc.,
Apple TV +, AT&T Inc., T
HBO Max, AMZN from Amazon.com Inc.,
Prime Video and CMCSA from Comcast Corp.,
Peacock.
“The huge growth in streaming entertainment has led legacy competitors like Disney, WarnerMedia and Discovery to compete with us in new ways, which we’ve been waiting for for many years,” executives wrote in a letter to shareholders Tuesday. “That’s why, in part, we’ve moved so quickly to grow and further strengthen our original content library across a wide range of genres and nations.”
Netflix has used large amounts of debt to fund this content creation, but letter executives said “we believe we are very close to being sustainable [free-cash-flow] positive “, and has only bolded a fragment of text throughout the letter.
“We believe we no longer have the need to raise external funding for our day-to-day running,” the letter’s bold text says.
Netflix began raising the price of popular streaming levels in the U.S. and Canada late last year as a way to counter any slow growth in subscribers. Executives anticipate that Netflix will attract 6 million new net subscribers during the first quarter of the year, a massive drop from the more than 15 million registered as COVID-19 worldwide during the first quarter of 2020.
While executives did not provide annual guidelines for adding subscriptions, they said growth in operating margin would slow, a sign they expect not to add as many subscribers in 2021. After gross margin grew 5 percentage points to 18% in 2020, we expect more modest growth of about 2 percentage points, up to 20%, this year.
“We intend to continue to increase our operating margin each year at an average rate of 3 percentage points per year for any period of a few years, but we anticipate some lump,” the executives wrote. “Some years we will be a little longer (like 2020), some years a little less (like 2021).”
Shares of Netflix have risen 47% in the last twelve months, while the S&P 500 SPX index,
has risen 13%.