Netflix Inc. (NFLX) stock has seen tremendous growth since the company went public in 2002. The rapid expansion and original content helped it in becoming a dominant player in the television streaming market. While the Covid-19 outbreak disrupted many businesses around the world, it helped Netflix to hit new milestones in terms of subscriber growth.
The company added nearly 26 million subscribers in the first two quarters of 2020, representing a more than two-fold increase when compared to the first half of 2019. This massive addition significantly drove the company’s share price in the current fiscal year.
The first half of 2020 helped the company in generating massive revenue. However, the subscriber growth remained weak in the third quarter. The company added just 2.2 million subscribers in the third quarter, according to its quarterly financial report for Q3. That is also one of the main reasons the stock is trading relatively flat since October 20, the day it reported its quarterly results.
However, the deceleration in subscriber addition was obvious as lockdown restrictions around the world were softened. But investors were not happy as the company missed its own forecast of 2.5 million new additions for the latest quarter.
Financial highlights and outlook
The Scotts Valley, California-based company reported a profit of $790 million, or $1.74 per share for the third quarter, as compared to $1.47 per share in the same period last year. On the other hand, analysts were looking for adjusted earnings of $2.13 per share.
Revenue came in at $6.44 billion, versus $5.25 billion in the year-ago quarter, and above consensus forecast of $6.39 billion.
The company also projected its subscriber growth for the current quarter. It expects to add 6 million new subscribers in the fourth quarter, below consensus forecast of 6.56 million.
The company has been aggressively expanding its operations in markets outside the U.S. It has already introduced its service in over 130 countries in an effort to ensure long-term revenue growth. It is also producing new content based on local customer preferences and local languages.
The massive growth of Netflix in recent years has lured many big names towards the television streaming market. Tech giants such as Amazon and Apple have been lately pouring heavy amounts to scale-up their TV offerings.
The company is facing increasing competition from rival services including Disney+, Prime Video, HBO Go, and YouTube among many others. Netflix needs to perform well in all the departments to retain its leading position in the market.
Recent stock performance