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Netflix Q1 Earnings Preview: Will Streamer Set New Record for Subscriber Growth?

Analysts anticipate Netflix could hit 10 million new subscribers when it reports its first quarter earnings on Tuesday

Netflix, at least for now, has escaped the crippling economic damage that’s hit Hollywood and the world. In fact, it currently appears to be on a trajectory to hit record heights at a time that has proven difficult for just about every other media-service provider and production company.

Without a doubt, Netflix has looked like Teflon to the effects of the coronavirus outbreak, with the streaming giant trading at new all-time highs on Wall Street. The company’s share price has rocketed 30% higher in the last month, pushing to about $420 per share. Bolstered by “Tiger King” and a few other timely releases, Netflix has benefited from having millions of people suddenly compelled to stay home all day and, for a few days last week, even boasted a slightly higher market cap than Disney.

Netflix CEO Reed Hastings has to be feeling pretty good heading into Tuesday, when the company will share its first quarter earnings report. That momentum, though, will have analysts even more fixated than usual on Netflix’s performance. Here is what a few analysts will be keeping their eye on.


This is typically the first thing investors and analysts care about with Netflix each quarter, and it tends to dictate whether its share price rises or falls immediately afterwards. Historically, Q1 has been a charmed quarter for Netflix, with the company adding a record 9.6 million new subscribers during the first three months of 2019. Heading into Tuesday, Netflix boasts 167 million global subscribers, with about 106 million of those coming from outside the U.S.

UBS analyst Eric Sheridan, in a recent note to clients, said he was increasing his Q1 subscriber projections from about 7 million to 9.5 million — putting Netflix within reach of a new record-setting quarter. (Netflix projected it would add 7 million subscribers during the quarter.) Sheridan attributed the boost to “higher gross [subscriber additions] and lower churn across all regions as more people are forced to stay home due to COVID-19.”

Sheridan is also bullish because internal UBS tracking data suggests audiences are connecting with shows beyond “Tiger King,” which was the top-ranked show or movie on Netflix for 25 straight days. Regional content has helped spur steady year-over-year download growth in countries like Brazil, South Korea, Turkey and Mexico, UBS found. At the same time, it should be pointed out that Netflix helped itself this quarter by moving up the release of a few big-name titles, including the third season of “Ozark”; previous seasons came out in late summer.

Stifel analyst Scott Devitt even went a step further, projecting Netflix will bring in 9.9 million new subscribers for Q1. Devitt, in a note to clients last week, pointed to internal data showing a 7% year-over-year increase in mobile app downloads in the U.S., and 10% year-over-year gains internationally.

International gains will be of particular interest to investors and analysts. Disney+ recently shared it hit the 50 million subscriber mark less than 6 months after its debut — with 8 million of those new subscribers coming from India. This is shaping up to be a battleground market moving forward, with Hastings having previously mentioned how important India is to Netflix’s longterm success.

Omdia analyst Sarah Henschel, meanwhile, told TheWrap she’ll be focused on a few things beyond subscribers.

“What I’m most curious about is COVID-19’s impact on usage in the past three months,” Henschel said, referring to Netflix’s occasional decision to share data on how much time viewers spent watching content during a particular quarter.

With more people staying home, the odds are higher that Netflix will feel comfortable sharing how many billions of hours its subscribers watched. And we already have a hint this figure could be eye-popping, with Roku last week revealing its active accounts watched 13.2 billion hours of content during Q1 — or the equivalent of about 3.75 hours of streaming each day on average.

Top 10 Lists and Original Content

Another aspect of Netflix’s business that Henschel wants to hear about is its recently-launched Top 10 lists. What knowledge has Netflix gained in the first two months of sharing its top shows and movies? And have they noticed whether they’ve driven viewer habits in any way?

Lastly, it may not be an issue that rears its head immediately, but analysts will want to hear how the pandemic has curtailed production, as well as Netflix’s content release strategy for the rest of 2020.

Netflix Chief Content Officer Ted Sarandos, in a recent interview with CNN, said the company is “pretty far ahead” when it comes to production, “so we don’t see any disruption in our output over the next few months.”

Devitt said the production question is a relevant one, but one he ultimately doesn’t anticipate will derail Netflix’s growth and scare away subscribers.

“On the consumer end, we don’t see a legitimate near or mid-term risk that viewers run out of interesting content given there are thousands of original content hours on the service, in addition to thousands of hours of licensed content,” Devitt said.

Netflix finds itself among the rare companies that appear to have benefited from the COVID-19 fallout. Analysts have set the bar high for Q1, but if it can show it has remained an “essential service” for its subscribers — and continued to pull in millions of new viewers — Netflix should be able to retain its recent Wall Street gains.

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