To The Moon

Generally, $Netflix, Inc.(NFLX)$ is the first big tech company to release earnings. Since the market style has been changing, investors' attitude is quite important.

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Key words to Netflix 21Q4 Earnings

Keyword 1: downloads

Tepid 4Q downloads that were 6% lower vs. 4Q20 as tracked by Sensor Tower. That said, downloads aren't a conclusive indicator of subscriber growth.

In fact, the 11% price hike in the U.S. and Canada announced on Jan. 14 suggests solid growth since the service has typically raised prices when user trends tend to be strong. Though downloads this month (Jan. 1-18) are flattish from the year-ago period.

The massive hit "Squid Game" helped Netflix reach 19.7 million downloads in October, its highest level of the year, based on Sensor Tower data. That strength didn't extend to November, with downloads declining to 15.5 million. The rush of content, including "Don't Look Up," later in December accelerated download growth, but it was still about 22% lower for the month vs. a year earlier and 6% down in 4Q.

Keyword 2:Subscribers

Netflix's strongest content quarter was clearly 4Q, given a string of hits that helped build on the success of "Squid Game." The list included original series "Maid" and returning shows "You," "Money Heist," "Emily in Paris," "The Witcher" and "Cobra Kai." The biggest releases for the quarter may have been movies "Red Notice" and "Don't Look Up," both already among the top three for Netflix's most-watched movies of all time. The 2022 slate is shaping up nicely with the returns of multiple hit shows like "Ozark," "Bridgerton" and "Stranger Things" that could put user growth back closer to pre-pandemic levels of about 27-28 million annual additions.

Agency's estimates of subscribers ranges from 6.25 million to 8.91 million, with a median of 8.13 million, which is slightly lower than the previous forecast of 8.5 million guided by the company. The Asia-Pacific region continues to be te biggest engine.

The attitudes of agencies are also beginning to diverge. Some people think that Netflix has an "almost insurmountable competitive advantage" over competitors overseas, while others think that Netflix's subscriber growth will slow down.

At the same time, the global average paying users are expected to reach 221.6 million

Keyword 3: growth rate and capital expenditure.

It is expected that the company's revenue in Q4 in 21 will be 7.664 billion US dollars, up 16.3% year-on-year, among which the largest revenue growth rate is still in the Asia-Pacific region, while the revenue growth rate in North America may drop to about 10%.

Due to the increase of content amortization, the company's gross profit and net profit will both decline in Q4, and EPS is expected to be 0.81 USD, down 31% year-on-year.

Keyword 4: Time

In terms of audience usage time, streaming media is still expanding in scale. Netflix still keeps the gap with its competitors, but compared with Q2, it is slightly lower.

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In addition, analysts began to adjust the target price of Netflix. JPM has just lowered their previous target price of $750 to $725.

In terms of valuation, current level of 45xP/E is still high, and the cost growth in competition of streaming media industry also make the future growth face certain pressure. As the predecessor of growth stocks, the valuation level given by the market will also determine other tech companies. 

Thus All eyes on Netflix!