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Netflix Down despite Beating Q4 Earnings and Subscriber Estimates

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Netflix posts mixed fourth-quarter results

Netflix (NFLX) stock fell more than 4% in after-hours trading on Thursday after the company announced mixed results for its fourth quarter of fiscal 2018 after the closing bell on January 17. The world’s largest online video streaming company crushed earnings estimates, but revenues came in behind Wall Street estimates for the quarter. The company also recorded better-than-expected subscriber growth in the fourth quarter but projected sluggish growth in the US for the next quarter.

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Netflix’s earnings and revenues

In the fourth quarter, Netflix posted adjusted earnings of $0.30 per share, edging past the Wall Street consensus estimate of $0.24 per share. However, earnings were down nearly 28% compared to the corresponding quarter’s earnings of $0.41 per share. The company missed its revenue expectations in the fourth quarter. Total revenue of $4.18 billion marginally lagged the estimate of $4.2 billion. Revenues increased ~27.4% YoY backed by strong growth in subscribers.

The company predicts first-quarter 2019 earnings to be $0.56 per share on sales of $4.49 billion. Analysts have estimated earnings of $0.82 on sales of $4.61 billion in the first quarter.

Subscriber growth

Netflix added 8.8 million paying subscribers in the fourth quarter, beating the company’s forecast of 7.6 million subscribers. The total global subscriber base of the company was nearly 139.3 million at the end of the fourth quarter.

For the first quarter, Netflix expects to add 8.9 million paying subscribers, with US subscriber additions of 1.6 million and international additions of 7.31 million. Analysts had predicted US paid net additions of 1.86 million and around 6.37 million international paid net additions.

The sluggish growth in subscriber additions in the US is probably due to growing competition in the streaming space. Established players such as Alphabet’s YouTube, Amazon’s (AMZN) Prime Video, Hulu, AT&T’s (T) HBO Now as well as new entrants such as Walt Disney (DIS), Comcast (CMCSA), and AT&T’s WarnerMedia are also posing a threat to Netflix. Disney and WarnerMedia are planning to launch their streaming services in late 2019, while Comcast’s NBCUniversal is planning to roll out its streaming service in early 2020.

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