To what extent can Netflix (NFLX) fight off threats from emerging streaming platforms from media titans Disney (DIS) and Comcast's (CMCSA) major asset NBCUniversal? The latter just secured commitments from the likes of Apple (AAPL), Amazon (AMZN) and WarnerMedia.
NFLX company is set to report fourth-quarter fiscal 2018 financial results Thursday after the closing bell. These are just some of the key topics management is certain to address during the conference call. If losing customers to competitors was an issue for Netflix, the company is not showing it.
Having just raised prices for its subscriptions in the U.S., Netflix is seemingly flexing some financial muscle. The company upped the price of both its basic and standard plans by $1, while its premium offering was increased by $2. Netflix believes (perhaps, knows) it has made the necessary investments in original content (both movies and TV shows) to maintain its status the streaming movie leader.
Already surging 31% year to date, Netflix stock has been on a tear and has understandably attracted a lot of attention, given that the S&P 500 index is up just 4% during that span. Obviously, investors applauded the price hike. Wall Street, meanwhile, will applaud only if the company crushes its numbers, particularly its subscriber additions.
For the quarter that ended December, Wall Street expects Netflix to earn 24 cents per share on revenue of $4.21 billion. This compares to the year-ago quarter when earning were 41 cents per share on $3.29 billion in revenue. For the full year, earnings are projected to rise 102% to $2.66 per share, while full-year revenue of $15.82 billion would mark an increase of 35.3% year over year.
The rapidly growing market movie streaming market is expected to gain steam, growing at a compound annual growth rate of 20% from 2018 to 2025 and reach $124.57 billion by 2025, according to Grand View Research. On Thursday Netflix must outline plans to secure its massive slice of that market. This is especially since average revenue per user is expected to rise from $91.37 in 2019 to $98.64 by 2023, according to Statista.
These projections underscore why Netflix’s subscriber metrics are often the focus of the earnings call. And this quarter will be no different. The company’s subscriber base stood at 137 million at the end of third quarter. Wall Street expects the company to add global subscriber additions of 9.2 million this quarter. This compares the 6.96 million new subscribers the company added in the third quarter, above expectations of 5 million.
The projected growth rate of the streaming market, which Netflix pioneered, has shown no signs of slowing down. And neither has Netflix. What’s more, as evidenced by the success of Bird Box, which attracted 45 million viewers in its opening weekend, it is clear that the company’s aggressive investment in original content is paying off. Combined with its recent price hike, which will be used to presumably fund its multibillion-dollar original content plans, Netflix it assured to remain a dominant platform despite emerging threats.