Sergey Lysakov | Jan 20, 2021 13:38
A rather unwieldy market of the current week, at which even mostly overbought assets of the fast-recovering banking sector just rolled back submissively to some lower levels despite their positive Q4 financial reports, were pleasantly surprised by high-flying Netflix (NASDAQ:NFLX) shares again. The largest streaming service in the world set another record on its global paid membership of more than 203 million subscribers.
The last-quarter figure bounced back to top 8.51 million new customers over this period which included holidays and lockdowns, so people spent a lot of extra time at their homes. Netflix new-comers made a temporary "pause" to reach as low as 2.2 million new subscribers who registered on the service in Q3, 2020. Previously, Netflix added 15.77 million subscribers in Q1, 2020, which included the impact from the initial COVID-19 lockdowns, plus more than 10 million in Q2, 2020.The official CEO's forecast for Q1, 2021 is about 6 million new devotees. The weekly global paid net adds of new consumers are represented in Pic 1.
Pic 1. Netflix: Weekly Global Paid Net Adds Year to Date
The Netflix stock (NFLX) finished a regular session on Tuesday at $501.77, which was $73.6 below the very historical high shown on July 12, 2020, but then it quickly surged 13.35% to $568.78 in after-hours trade. Investor and financial analyst Jani Ziedins quite reasonably wrote for Cracked.Market: "NFLX had two disappointing earnings reports [for Q2 and Q3 2020]…and the stock tumbled -6.5% and -6.9% the day after each earnings report. Yet here we stand, still within 10% of all-time highs. Bad news and a resilient stock? That’s a textbook case for a stock that wants to go higher. Anything that refuses to go down will eventually go up. And right now, NFLX is acting like it wants to go back to the highs". The step-by-step reaction of Netflix shares to the reports for the last three quarters is shown in Pic 2.
Pic 2. Netflix daily chart with the reaction on Q2, Q3 and Q4 reports for 2020
Since the start of 2018, Netflix paid memberships have risen from 111m to the current 203.66m and the average revenue per membership has grown from $9.88 to $11.02, despite significant forex headwinds as the company has a Euro denominated debt burden, and EUR/USD is now trading above 1.20. So, Netflix is becoming cash-flow positive even if all the balance of factors are taken into account. "This approach has allowed us to organically increase revenue by $4-$5 billion annually over the past several years," another excerpt from the shareholder letter states. In the fourth quarter, the company said its current liabilities for content were $4.429 billion, up slightly from $4.413 billion in the quarter from a year ago, while its non-content related liabilities came in at $2.6 billion this quarter. However, the huge cost to develop or license original content is probably not a source of worries for the numerous investing audience of Netflix.
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