Netflix earnings, subscribers get a ‘Squid Recreation’ bounce, however forecast is tamer


Netflix Inc. saw a surge in profits and subscriber growth when it posted its biggest surprise hit in the third quarter, but the predictions for the holiday season weren’t as generous.

Netflix NFLX, + 0.16% on Tuesday, reported 4.4 million new net paying subscribers in the third quarter, dwarfing its own forecast (3.5 million) as well as the average analyst forecast of 3.78 million, according to FactSet and the streaming video service announced 213.6 million total subscribers. Executives said they expect 8.5 million new subscribers in the fourth quarter if new content is added to Netflix’s biggest hit to date, Squid Game, which would match last year’s vacation quarter performance.

The average analyst estimate for the fourth quarter new additions was 8.4 million, but many analysts expected Netflix to slightly exceed that number in their forecast on Tuesday. For example, Stifel analyst Scott Devitt said he expected more than 10 million new subscribers in the fourth quarter as Netflix “successfully releases compelling original content, expands its international distribution and enters a seasonally favorable period for sub-add”.

The worldwide hit series “Squid Game”, an international mega-hit estimated at nearly $ 900 million for the company according to a recent report by Bloomberg News, is a main reason for the expected turnaround by the end of the year.

Netflix has a huge subscriber advantage in a crowded streaming market that includes rivals Walt Disney Co. DIS + 0.02%,
Apple Inc. AAPL, + 1.51%,
AT&T Inc. T, +1.03%,
Comcast Corp. CMCSA, + ​​1.92%, Inc. AMZN, -0.08% and ViacomCBS Inc. VIAC, + 1.40%.
But with a new string of hugely popular content coming to Squid Game this quarter, including new seasons of the earlier hits The Witcher and Tiger King, Netflix is ​​expected to rush back for the rest of the year.

For more: Can ‘Squid Game’ and video games be game changers for Netflix?

“After content was lighter than normal in the first and second quarters due to COVID-related production delays in 2020, we are seeing the positive effects of a stronger list in the second half of the year,” said company executives in a letter to shareholders Tuesday.

In the letter, executives called “Squid Game” “our greatest TV show of all time”.

“An incredible 142 million member households worldwide chose to watch the title in the first four weeks,” they wrote, adding that they are shipping related merchandise. “The popularity of Squid Game is really amazing; This show has been rated our No. 1 program in 94 countries (including the US). “

Netflix said it made $ 1.45 billion, or $ 3.19 per share, down from $ 1.74 per share a year ago and slightly exceeded expectations of $ 2.57 per share according to the analysts surveyed by FactSet. Netflix’s revenue rocketed to $ 7.48 billion, up from $ 6.44 billion a year earlier, in line with Street’s estimates of $ 7.48 billion.

Netflix stock rose nearly 2% in after-hours trading immediately after the announcement on Tuesday, but earnings fell to less than 1% over the course of the extended trading session. The stock is up 17% so far this year, while the broader S&P 500 index, SPX, is up + 0.74% in 2021, up 20%.

Expectations for fourth quarter earnings don’t necessarily mean a smooth run for Netflix, which has received a barrage of criticism for its defense of comedian Dave Chapelle’s controversial special.

“Media and technology platforms such as Netflix, Facebook FB, +1.39%,
and others must be held accountable for their role in distributing content that encourages hate, homophobia, transphobia, misogyny and harmful stereotypes, “said James P. Steyer, CEO of Common Sense, in a statement expressing general opinion on Netflix reflects.

Meanwhile, rival Disney has warned that pandemic production delays could fall below Disney + subscriber numbers for the current quarter, prompting Barclays analyst Kannan Venkateshwar to warn the media empire of “structural” problems with its streaming operations. The analyst downgraded Disney stock from overweight to equilibrium on Monday and lowered its price target from $ 210 to $ 175.

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