Netflix Falls Short on Q3 Subscribers and Misses EPS

Netflix said in an earlier 2020 quarterly report that growth has slowed down dramatically due to accelerated subscriptions in the early quarter, driven by stay at home orders. While Q3 2019 resulted in 6.8 million subscriber additions, the pandemic has messed with all sorts of company plans.

The report blamed slowed growth and poor results based on quote, “record first half results.” While in the early pandemic, fueled by accelerated subscriptions, NFLX was a popular buy and stock to hold.

Approaching the next quarter, Q4, Netflix expects an increased subscription rate, up to 6 million adds, which is still lower than last year’s 8.8 million added subscriptions.

Executives wrote in the shareholders letter that the pandemic and its impact continues to increase volatility in Netflix’s market, making growth uncertain, but that they expect leading into 2021 for growth to re-accelerate.

While most of the report was less than ideal, a first was made with 46% of global additions coming from the Asia-Pacific region, the highest yet.

In response to that, Netflix executives said “(we’re) pleased with the progress (we’re) making in this region, and, in particular, that (we’ve) achieved double digit penetration of broadband homes in both South Korea and Japan.”

Even with the slowdowns in both Netflix subscription growth and EPS, the company still expects those to recover to pre-COVID growth speeds, and for filmmaking and TV production to accelerate as well. This would include some currently restarted production on hit shows, such as Netflix’s Stranger Things.

Another positive in the letter was Netflix’s free cash flow, marking the third straight quarter of positive flow. Currently sitting at $2.2 billion for the first nine months of 2020, this would leave much more available cash for increased production and more heavy advertisement.