Netflix Q4 2021 Earnings Preview

  • NFLX.us
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Q4 Forecasts

The streaming giant releases its financial results for the last quarter of 2021, on Thursday January 20, after Wall Street closes, being traditionally the first of the FAANGs (Facebook, Amazon, Apple, Netflix, Google) to report.

As always, investors will be keenly awaiting the paid subscriber figures, which had risen to 213.56 million, as per October's Q3 results – a 9.4% growth compared to the prior quarter in an overall solid report. [1]

For the quarter reported on Thursday, Netflix had then projected a similar rise, with the addition of 8.5 million paid users that would bring the total to 222.06 million member.

Netflix had forecasted Revenue of $7.712 billion, compared to $7.48 billion in the prior quarter and $6.64 billion a year ago.

Earnings were forecasted at $0.80/share, compared to $3.19 in the third quarter and $1.19 a year ago.

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Operating Margins were expected to fall to 6.5%, from 23.5% in the third quarter of 2021 and 14.4% in Q4 2020.

Awards & Nominations

In December, Netflix had received 17 film nomination and 10 TV nominations, for the January 9th Golden Globe Awards, which were criticized recently and there was no televised ceremony.

In any case, on the Motion Picture front, Netflix won the Best Drama award for "The Power of the Dog ", but its star-studded "Don't Look Up" lost the Musical/Comedy category to the "West Side Story" from 20th Century Studios / Walt Disney Studios.

In the Best Drama Series category, it competed with its widely popular "Squid Game" and "Lupin", but lost the awards to HBO/HBO Max's highly acclaimed "Succession". [2]

The Screen Actors Guild (SAG) Awards, which seem to have a more elevated status this year, will be hosted on Sunday February 27. The nominations were announced last week and Netfix topped the Motion Pictures (7) category, but was second behind HBO/HBO Max on the TV program front, getting 10 nominations. [3]

It is worth noting that the Screen Actors Guild honors outstanding individual, cast and ensemble performances in TV movies, but not the TV series and movies themselves.

Price Raise

The firm reaches 15 years of streaming, as the service was introduced in 2007, allowing members to instantly watch series and films - in what ended up transforming the way people consume TV series and movies.

Netflix users may not be in a celebratory mood though, since the company increased its monthly prices in the United States on all three subscription plans (Basic, Standard, Premium). The new pricing applies to all new members, whereas current subscribers "will receive an email notification 30 days before their price changes". [4]

Netflix has a very large subscriber base and it looks like adding new members is becoming harder, especially since it has been facing increasing competition by the likes of Disney+ and other streaming services.

A price hike will probably help the streaming giant continue to offer quality content, that goes beyond TV series, since it has been able to produce hit movies and win awards for them, as discussed above.

Change in Metrics & Entry Into Games

In the Q3 earnings report, Netflix had announced that it would change the way it measures viewership, switching to an "hours viewed" based system, from previous focus on the number of accounts that choose to watch each show. The firm had commented that "we think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction."

It also started posting a weekly Top-10 of films and series based on the new system, while Korean TV show "Squid Game" that was released in September, has become the firm's most popular program.

During the reported period, the streaming giant also made its entry into videogames, as it is trying expand beyond TV and films.

The new service is available within the app for Netflix members, at no extra cost and started with five titles. [5]

Stock Movement

NFLX.us started the fourth quarter strong and registered new record high in November (701.04), but subsequently dropped, having a mixed Q4.

The new year is not good so far, since it loses more than 10% and runs its third straight negative month, as the tech sector in general has been having difficulties in the face of surging inflation and the Fed's aggressive tightening prospects.

Last week closed in the red, although it rebounded on Friday, as markets seemed to like the new higher pricing for its subscription plans.

The 2021 lows from May (478.55) are now in the spotlight, but the Relative Strength Index is at oversold levels. This could lead to a recovery, but a break above its EMA200 will be needed to revive its upward aspirations (575-585).


Past Performance: Past Performance is not an indicator of future results.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Jan 2022 https://s22.q4cdn.com/959853165/files/doc_financials/2021/q3/FINAL-Q3-21-Shareholder-Letter.pdf

2

Retrieved 17 Jan 2022 https://www.goldenglobes.com/winners-nominees

3

Retrieved 17 Jan 2022 https://www.sagawards.org/media/news/releases/nominations-announced-28th-annual-screen-actors-guild-awardsr

4

Retrieved 17 Jan 2022 https://help.netflix.com/en/node/24926/us

5

Retrieved 23 May 2022 https://about.netflix.com/en/news/let-the-games-begin-a-new-way-to-experience-entertainment-on-mobile

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