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Could Netflix’s Strong Subscriber Additions Continue?

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Netflix’s subscribers

Netflix’s (NFLX) first-quarter subscriber numbers, reported on April 16, were higher than expected. Netflix added 9.6 million paid streaming subscribers, beating its guidance of ~8.90 million and analysts’ expectation of 8.92 million. The figure was 16.2% higher than its 8.26 million subscriber additions in Q1 2018 and 8.6% higher than its 8.84 million additions in Q4 2018, signaling higher demand for video streaming services. Netflix’s consistent investments in original content have earned it subscribers all over the world.

The subscriber additions helped the company report better-than-expected revenue and earnings. Netflix’s adjusted EPS of $0.76 and revenue of $4.52 billion beat analysts’ estimates by 33.3% and 0.4%, respectively. 

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Guidance

However, in the second quarter, Netflix expects its paid subscriber net additions to fall year-over-year to 5.0 million from 5.45 million, making investors cautious. The company’s total global paid subscriber base reached ~148.9 million at the end of the first quarter and is expected to touch 153.86 million in the second quarter. Netflix is projected to add 200 million subscribers, while Walt Disney’s (DIS) Disney+ is expected to win 75 million global subscribers by fiscal 2024, with 25 million US subscribers. In comparison, Wedbush Securities expects Apple TV+ to add 100 million subscribers over the next three years.

Increased competition in the streaming space is expected to pressure Netflix’s subscriber growth. Netflix competes with Amazon Prime, Hulu, and Alphabet’s YouTube. Telecom and media giants AT&T (T), Discovery (DISCA), and Comcast (CMCSA) are also on track to offer streaming services in a year or two.

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