Netflix ( NASDAQ:NFLX ) has been losing some of its U.S. subscribers recently. When the company released its third-quarter results on Oct. 19, investors were curious to see how subscriber growth had shifted during the previous few months. In this segment of Backstage Pass , recorded on Oct. 19 , Fool contributors Neil Patel and Brian Withers discuss the high and low points from the company’s third-quarter earnings report. 10 stocks we like better than Netflix, Inc.
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Netflix, Inc. wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of October 20, 2021
Neil Patel : Concerns, I think this is nothing new here. The US market in particular, a lot of people think it’s a mature market. The most recent quarter, Netflix added 70,000 subscribers there. In the previous quarter, they actually lost subscribers.
It’ll be interesting to see how the company can continue to attract users domestically. Again, the crowded streaming market, large ones like Disney , Amazon Prime, and then smaller ones like you have Discovery , you have Paramount, you have NBC’s Peacock.
Then also with the NFL in full swing, you have the NBA starting, a lot of different entertainment options out there for viewers in the evening. Those are some concerns for investors to look out for.
Brian Withers: Can you leave the slide up? I love that you called that the international subscriber growth, which is what, 90% plus of the overall subscriber growth, which is really stellar.
The fact that they’re maintaining, U-Can is United States and Canada, the fact that they’re maintaining against a surging Disney Plus and other streaming solutions, I think it’s positive for as long as Netflix is in the business.
To me, this looks like a great quarter all around, but the fact that they just met expectations and even this 83% earnings per share beat of 83%, that’s fantastic. But the market, it’s essentially flat after hours. It’ll be interesting to see what Netflix does tomorrow after the management call. More shareholders have had a chance to look at the results.
Neil Patel: Just wanted to add about the EPS, so last year, because content production had slowed, Netflix wasn’t expensing a lot of their content costs. Sorry, that’s not what I’m saying.
I think the EPS varies obviously, like I said, with the production delays and stuff. You’re going to have lumpiness with that, especially with last year. I think in the fourth quarter, they’re expecting that EPS to be, I don’t know, just maybe in the teams growth from Q4 of the previous year.
That’s because, like I said, they’re really seeing a huge slate of content and then they have to amortize that or expense it in that period that it’s released. That starts and that depresses that EPS.
The EPS figure is lumpy, and I think looking at that over the long-term is obviously, will give investors a better signal. But unsurprisingly for Netflix, it’s all about the subscriber growth, and so to see them beat on that, I think is a real positive for investors.
Brian Withers: I think this is pretty solid all around. Certainly, the renewed commitment to free cash flow positive is something that shareholders have been waiting for a long, long time.
This transition to that, how they’re going to get to free cash flow positive and the lumpiness, I think is something that investors should expect over the next probably couple of quarters until those things straightens out, right?
Neil Patel: Yeah, definitely. It’s just a great sign that they felt, not only did they mention that they plan to be sustainably free cash flow positive in 2022. But then this year, in the first quarter of 2021, they already instituted a buyback program.
The confidence that they will continue or that they will sustainably generate free cash flow, they didn’t wait on that to happen. They actually announced the share buyback, and so I think that’s a good sign.
Brian Withers: Super. The only thing of everything that you showed here that’s a bummer is the stock has trailed the market over the last year. Neil Patel: I think that again, […]
source Netflix’s International Subscriber Growth Blew Domestic Growth Out of the Water in Q3
Protected by Patchstack