How Netflix Performed in the Fourth Quarter



Netflix’s global paid memberships are on the rise

Netflix (NFLX) announced its fourth-quarter results after the close of market hours on January 17. The stock closed at $353.19 on January 17 and was down by 3.8% in after-hours trading. Netflix’s total revenues of $4.19 billion in Q4 2018 were slightly lower than the consensus analyst revenue estimates of $4.2 billion. For 2018, the company’s revenues grew 35% YoY to $16 billion. It reported diluted EPS of $0.30 per share, which exceeded consensus Wall Street analysts’ estimates of $0.25 per share and Netflix’s internal estimate of $0.23 per share.

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The company reported 139.3 million global subscribers in the fourth quarter, which slightly exceeded the company’s internal forecast of 138.02 million global streaming memberships. Netflix’s global streaming paid memberships have gone up by 29 million from the beginning of 2018. It’s average paid memberships and ASP (average selling price) rose 26% and 3% YoY, respectively.

Netflix’s operating results in Q4

The company had an operating income of $216 million in Q4 2018 with an operating margin of 5.2%. Its operating margin showed a downward trend from an operating margin of 7.5% in the year-ago quarter, which was a result of a slew of new shows and movies launched in the fourth quarter. However, Netflix’s operating margin of 10% for fiscal 2018 was in-line with its expectations. It is targeting an operating margin of 9% in the first quarter of 2019 and a full-year operating margin target of 13%.

While Netflix is doing well internationally, it is also facing increasing competition for viewers from other OTT (over-the-top) players like Amazon (AMZN) with its Prime Video service.

In the United States, Hulu is also stepping up its game and ended 2018 with 25 million subscribers. Hulu is jointly owned by Comcast (CMCSA), Disney (DIS), and AT&T (T).


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