Wednesday, October 21, 2020, 15:18 GMT
The online video giant Netflix released its third quarter 2020 financial report after the stock market opened in the US local time on Tuesday. The financial report reveals that the third-quarter sales of Netflix was US$ 6.44 billion, a rise of 22.7 percent relative to the same time last year; net profit was US$ 790 million, beating US$ 665 million in the same time last year; earnings per share was US$ 1.74, compared to US$ 1.47 in the same period last year. As subscriber growth and earnings per share were less than market forecasts, following the earnings release, Netflix shares dropped nearly 6 percent.
The below are the highlights of Netflix ‘s third quarter earnings:
Third-quarter revenue from Netflix was US$ 6.44 billion, a rise of 22.7 percent relative to US$ 5.25 billion in the same time last year, which beat the US$ 6.38 billion that analysts typically expected;
Netflix’s net profit for the third quarter was US$ 790 million, beating US$ 665 million in the same time last year.
Third-quarter earnings per share for Netflix is US$ 1.74, higher than US$ 1.47 in the same period last year, but well below the consensus analyst estimate of US$ 2.144.
In the third quarter, Netflix’s paying viewers rose by 2.2 million, much less than the 6.8 million anticipated in the same time last year and even less than the 3.57 million expected by analysts. The cumulative existing subscribers has hit 195 million.
In the fourth quarter, Netflix expects its viewers to rise by 6 million, but still well below 8.8 million in 2019 for the same period.
This is Netflix’s first financial update since it was elevated to co-CEO by Ted Sarandos, who has long served as chief content officer. Netflix informed shareholders last quarter that its subscription development is starting to decline again after the initial turnaround attributable to the global asylum steps.
In a letter to shareholders, Netflix said that the decline in subscription growth is widely expected, as the firm is currently struggling to cope with the effects of the recent outbreak of crown pneumonia. The letter read: “The virus and its effects continue to make forecasts very volatile, but we expect our development to rebound to levels close to before the disease, when the planet is expected to recover in 2021.”
The Asia-Pacific region’s subscribers are the primary contributors to Netflix’s paying subscription growth, accounting for 46 percent of the global net subscriber growth. “In the letter, Netflix said,” We are pleased with the company’s success in this area, particularly with double-digit growth in our broadband household penetration rates in South Korea and Japan.
While the virus may have increased the growth of Netflix’s subscribers, for security reasons, it has also halted film production. This suggests that the release schedule would slow down, but since it has so many shows and movies in the pipeline, this gap is not so clear to Netflix. The business said that the most successful original series, such as “Stranger Things,” have started re-shooting.
At the same time, as the show’s production resumed, the company announced that the main shooting of more than 50 works had already been completed since mid-March and that it aimed to complete the main shooting of another 150 works by the end of this year. The firm also expects the number of original Netflix items released next year to begin to rise year-on-year.
For the third straight year, Netflix’s free cash flow was positive, touching $2.2 billion in the first nine months of 2020. In the fourth quarter, the organization expects free cash flow to turn negative and free cash flow to be about $2 billion for the full year of 2020, which is higher than the previous optimistic breakeven forecast. Netflix expects negative $1 billion in free cash flow in 2021, but it will ultimately break even.
Netflix estimates sales to be 6.57 billion US dollars in the fourth quarter, while the industry is projected to be 6.59 billion US dollars; profits per share in the fourth quarter is 1.35 US dollars; the market is expected to be 0.97 US dollars; paid customers will rise by 6 million in the fourth quarter; the market is expected to increase by 6.54 million people.
Netflix shares declined almost 6 percent after the stock was published after the earnings report. On Tuesday, the market closed down 1 per cent to close at $525.42 per share.