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5 Takes on Netflix’s Fourth-Quarter Earnings Report

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Netflix (NASDAQ:NFLX) reported its fourth-quarter earnings results after the closing bell on Tuesday. The company was the first major video streaming company to report results for the quarter ending December 2019. Apple, Amazon (NASDAQ:AMZN), and Walt Disney (NYSE:DIS) will release their earnings on January 28, January 30, and February 4, respectively.

Netflix’s fourth-quarter earnings results were impressive. Here are the five key takeaways from the earnings report.

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Netflix’s earnings beat the estimates

Netflix’s fourth-quarter revenue increased 30.6% year-over-year to $5.7 billion. The revenue beat the company’s own internal forecast of $5.4 billion and analysts’ expectation of $5.5 billion. The EPS was $1.30, which was boosted by a favorable tax adjustment. The company expected an EPS of $0.51, while analysts expected an EPS of $0.52—as stated in the fourth-quarter earnings results. Last year, the EPS was $0.30.

US is a problem market

Netflix added 8.8 million subscribers globally, according to the fourth-quarter earnings results. The company added 8.8 million subscribers a year ago. Netflix expected to add 7.6 million subscribers.

Despite the overall subscriber growth, the US is still a challenging market for Netflix. The company added just 420,000 US subscribers, according to the fourth-quarter earnings report—compared to over 1.5 million subscribers added last year. Across the US and Canada, Netflix added 550,000 subscribers—down sharply from 1.75 million subscribers a year ago. The subscriber growth was impacted by tighter competition and some customers canceling subscriptions following recent price increases in the US.

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Competitive threat from Disney+ and Apple TV+

Netflix faced more intense competition in the fourth quarter after Disney+ and Apple TV+ launched in November. However, the company’s earnings and global subscriber growth beat its own expectations. Netflix hasn’t seen any material impact on its growth in markets outside the US where Disney+ launched. Outside the US, Disney+ rolled out in Canada, the Netherlands, Australia, and New Zealand.

Netflix is proud of its progress as the video streaming competition heats up. While Disney+ is just starting out, Netflix already has over 167 million subscribers. Netflix plans to build on its strength.

Content remains front and center

A strong slate of original programming supported Netflix’s subscriber growth in the fourth-quarter earnings results. The company plans to invest more in content, particularly local original content. Netflix has great content, which will help it stand out compared to its peers.

Expect more borrowing as video streaming war intensifies

Netflix borrowed more than $1.2 billion through bond sales in the US and Europe, as reported in its earnings. The borrowing drove the company’s debt to $14.8 billion at the end of the quarter. Netflix expects to continue borrowing to finance its investment needs.

Netflix stock rose 2.26% in after-hours trading on Tuesday following the release of the earnings report.

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