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Netflix blew past subscriber expectations to hit 200 million subscribers, offering a hint at either a dividend or buyback program for shares.
Netflix blew past subscriber expectations to hit 200 million subscribers, offering a hint at either a dividend or buyback program for shares.
Netflix, the 24 year old previously-rental company has finally hit 200 million subscribers, a major milestone for the company. That now places it– nope, still number one, nevermind.
The streaming service said in its fourth quarter 2020 earnings report that it now has more than 200 million subscribers, after gaining more than 8.5 million subscribers to end off 2020. That bests not only Netflix’s own expectations, but also those of analysts.
Fourth quarter profits fell to $542 million, down from $587 the year before, although revenue jumped 21% to $6.6 billion. Overall paid memberships rose by 22% to 203.66 million. Subscriptions were expected to drop to around 6 million, up from Q3’s 2.2 million additions, but under Q2’s 10 million.
As CEO Reed Hastings said,
“2020 was an incredibly difficult year with extraordinary loss for so many families, new restrictions that none of us have ever had to live with before and great uncertainty. We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business. With 8.5m paid net additions in Q4, we crossed the 200m paid memberships mark. For the full year, we added a record 37m paid memberships, achieved $25 billion in annual revenue (+24% year over year) and grew operating profit 76% to $4.6 billion.”
The company also said that they expect to free cash flow break even throughout 2021, allowing Netflix to stop relying on external credit for funds, helping to put more into the company. As the letter said, “We believe we no longer have a need to raise external financing for our day-to-day operations,” meaning that Netflix will rely less on external debt, and can return more physically to shareholders.
Netflix added that although the company expects to be FCF breakeven for 2021, with more cash generated, they still “intend to maintain $10 billion to $15 billion in gross debt.” They continue by saying that the growing cash pile will involve “explore(ing) returning cash to shareholders through ongoing stock buybacks.“
This would be the first time since 2011 that the company would initiate stock buybacks, sometimes the equivalent to a share dividend. By reducing the number of shares left available to the public, the remaining shares held by shareholders will be worth more, theoretically giving all holders extra money.
Netflix made sure to include the expected section on the company’s increasing competitor count, even congratulating some of their competitors. As 2020 was an incredible time for streaming platforms, more have appeared, and those that have been around since before 2020, had prospered even more.
There were launches from NBCUniversal with Peacock, Discovery with Discovery+, WarnerMedia with HBO Max, and more, not even including the growing star, 2019’s Disney+.
The company even went as far as to congratulate Disney while still pointing out their continuous growth: “Disney+ had a massive first year (87 million paid subscribers!) and we recorded the biggest year of paid membership growth in our history.”
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Overall, it’s been an impressive year for Netflix, even besting their own estimates as well as analysts’ estimates. The stock’s up 12% after hours, and with buybacks coming towards shareholders (possibly) in the near future, there’s so many new catalysts for the stagnating stock.
By proving the company can continue to innovate and compete, even with growing competitors, it’s incredibly impressive and showing of just how scrappy this now massive company can become when they want to.
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