Netflix (NFLX) Q4 2020 Earnings Call Transcript
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Netflix’s Subscriber Growth Fuels 4Q Sales Boom; Shares Pop 12%
Netflix reported stronger-than-expected 4Q sales, driven by strong growth in its paid subscribers base. Shares of the video streaming giant soared 12.3% in Tuesday's extended market trading session.
Netflix's (NFLX) 4Q revenue of $6.64 billion exceeded analysts’ expectations of $6.62 billion and jumped 21.5% year-over-year. The company added 8.5 million new paid subscribers during the quarter which surpassed its projection by 2.5 million. The company ended 2020 with over 203.66 million paid subscribers.
Meanwhile, Netflix’s 4Q earnings per share of $1.19 missed the Street consensus of $1.38 and dropped 8.5% year-over-year. (See NFLX stock analysis on TipRanks)
For 1Q, Netflix expects to add 6 million new paid subscribers to its platform. Moreover, the company is now targeting an operating margin of 20% in 2021, which is 1% higher than its previous forecast of 19%.
Following the earnings release, Oppenheimer analyst Jason Helfstein raised the stock’s price target to $620 (23.6% upside potential) from $550 and reiterated a Buy rating. In a note to investors, Helfstein wrote, “the company is on a clear trajectory toward improving margins, albeit FY21 guidance is likely conservative on FX (foreign exchange), FY of COVID safety costs, resumption of hiring and timing of content releases.”
Overall, the rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 18 Buys, 7 Holds, and 3 Sells. The average price target of $594.50 implies upside potential of about 18.5% to current levels. Shares have gained about 47.7% over the past year.
Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Netflix is currently very negative as 21 hedge funds decreased their cumulative holdings in NFLX by 681.5K shares in the last quarter.
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