Netflix (Nasdaq: NFLX) added 15.8 million subscribers in the first quarter which was well above expectations of 8.2 million, primarily due to the coronavirus forcing people to stay at home. It's one of the few companies that is seeing a boost in business during these times. To compare, Netflix added just under 10 million subscribers in the first quarter of 2019 and 7.8 million in the previous quarter.
Earnings per share slightly missed expectations at $1.57 versus $1.63, while revenue came in at $5.77 billion versus expectations of $5.76 billion. Following the release, Netflix's stock was 10% higher, but the stock gave up these gains as the company's guidance was quite conservative. Prior to Wednesday's open, the stock was trading 2% lower.
Over the past month, Netflix is up nearly 50% and 10% above pre-coronavirus levels. Some profit-taking was expected especially as other tech giants have been hit in recent days.
Conservative Guidance
In its conference call, management was quite honest in expressing its uncertainty about the future. It expects slower growth and loss in subscribers and viewership when the lockdowns end. It's projecting 7.5 million subscribers added in the second quarter and a potential loss of subs in the third quarter as the economy normalizes.
Management went to great lengths to emphasize that these figures were based on assumptions about the coronavirus and the shutdown which are unknowable and subject to change. However, it did reiterate that while the company's fortunes in the short-term would shift to these factors, in the long-term, streaming content online will continue to get more popular. Of course, Netflix is the clear leader in this field.
Looking Ahead
Relatively speaking, Netflix is in a great position beyond the government and health crisis essentially forcing people to stay at home. It has new content lined up for the next few months. While filming and production are shut down on the bulk of its projects, it has ample cash reserves to buy or license new content to fill in any gaps caused by delays.
In the last couple of years, content became a seller's market due to the explosion of new, streaming options like Amazon (Nasdaq: AMZN) Prime, Disney+ (NYSE: DIS), Hulu, HBOMax (NYSE: T), NBC Peacock (NASDAQ: CMCSA), etc. Other than Amazon, these companies are focused on survival rather than growth which puts Netflix in an advantageous position to secure content for its library at reasonable prices.