Netflix, Update after disappointing Q3 earnings report

Updated: Nov 19, 2020


Netflix, the world’s leading streaming entertainment company, is set to report its third-quarter results on October 20 after the market closes, and as usual the investor is fixated on the numbers of subscribers it may have added or even lost.

Publicly traded companies release earnings reports every quarter. And generally, is the only real data that investors can use to decide how well the business is doing.


Many investors trade or buy shares at this time based upon their prediction of what will be disclosed in the earnings report.

You can go online and find hundreds of analyst’s predictions. Right or wrong the stock usually has a volatile time and it is also important to evaluate the comments after the report of the CEO predicting future growth estimates and potential risks.


In general, having read several reputable commentators many Investors figure that Netflix had a great Q3 considering were all at home watching it ,some projections believe 3.6 million global subscribers have been added — ahead of the company previous forecast for 2.5 million — giving a potential total of almost 197 million.

The company has about $15.3 billion in long-term debt — and many are backing that it can keep growing and continue to raise subscription prices even as competition grows. Will Netflix see a global price increase following the recent $1 hike to the price of its standard plan in Canada?

Its share price is up 64% this year, and analysts believe Q3 revenues rose nearly 22% to $6.4 billion.


Let’s look at some opinions prior to the report.



Here a sample of what Wall Street is saying about Netflix.


Cowen

“We view NFLX as a pioneer in online streaming, with further expected growth in subscribers in the U.S. and expectation for long-term subscriber growth internationally in existing and new markets. At scale, NFLX subscriptions have very high incremental margins (about 80% to 85%), which should provide margin upside longer term”.


-John Blackledge

Goldman Sachs (Buy Rating Maintained, $670 PT Raised From $600)

“We expect Netflix to report third-quarter results well above guidance and consensus expectations, with roughly 6 million net subscriber additions, driven by growth in content on the platform, a lack of competition for entertainment hours and spend, and more time being spent at home, potentially offset by churn levels modestly higher than we’ve seen in the past two quarters.


-Heath Terry

Piper Sandler (Overweight Rating and $534 PT Maintained)

“We remain comfortable with our estimates for 8.8% and 34.5% subscriber growth year over year for the U.S.-Canada and international, respectively, driven by the ongoing stay-at-home environment, which boosted first-half 2020. We anticipate little impact from HBO Max, (T) - Get Report launched 5/27. Despite increasing competition, Netflix continues to capture a significant share of content consumption dollars. Additionally, with covid-19 fears pushing consumers away from travel and out-of-home entertainment, we look for Netflix to continue as a beneficiary of this altered behaviour”.

-Yung Kim



On the other hand


One of Netflix’s most bearish Wall Street analysts said last Thursday that the company’s third quarter results will be worse than she previously thought.

Needham’s Laura Martin, slashed estimates for Netflix’s third quarter in a new note to clients.

Whatever the results the stock moves so if you want to buy it or trade it, look at what happens to it over the next few days. And importantly the summary and analysis from the CEO or company spokesperson.

It is a time when many investors make short-term trading profits based on projections of what these reports will contain. Generally, it is not necessary to trade ahead of earnings reports, and sometimes it's better to trade or buy the stock after its report has been released.

https://www.investopedia.com/terms/e/earningsreport.asp

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Chart shows month on month stock performance over the past few years.
















After the earning report

Netflix shares fall after it reports slowing subscriber growth


Netflix stock fell around 5% in after-hours trading Tuesday after the company posted slowing growth in new subscriptions and lower-than-expected profits, a sign that the streaming giant's pandemic bump may be petering out.

The company said it added 2.2 million net memberships in the three months ended September 30, down from 6.8 million new memberships during the same period in the prior year. The additions bring Netflix's total subscribers to nearly 195.2 million, lower than the 196.2 million Wall Street analysts had projected.


Conclusion,

some traders will consider entering after the results if they believe this is a short term blip in the companies earnings. Others may look at alternative streaming companies to invest in.


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