Its earnings beat propelled many tech stocks that are reporting in the coming weeks to strong gains as well. In total, the Nasdaq 100
Inside the Numbers
Beyond its typical metrics, the biggest takeaway from the earnings report is that Netflix believes it is "very close" to becoming free cash flow positive and is considering share buybacks. Once, the company becomes cash flow positive, it won't be reliant on external funding for its operations.
Some of the other important metrics from the report were earnings per share of $1.19 vs $1.39 consensus. While earnings fell short, revenue beat at $6.64 billion vs $6.63 billion. Another beat was new subscribers at 8.5 million vs 6.47 million.
In the conference call, management said that the company intends to reduce its debt load of $15.1 billion. In recent quarters, the company had also posted better than expected results but this was attributed to a surge in surprises due to COVID and production delays that reduced expenditures. Another positive note from the conference call was the company saying that Disney+'s
Stock Price Outlook
The Q4 results are a setback to the bear case for Netflix. Many believed the company's recent subscriber gains were temporary due to the coronavirus. They also saw the rise of new streaming competitors like Peacock
Over the last few months, tech stocks have lagged the broader market. However, the sector can resume its leadership role with a strong earnings season. Skeptics believe that tech stocks are due to underperforming in 2021 following 2020's outperformance especially if higher interest rates can trigger a rotation from growth to value.
So far, Netflix's earnings support another regime of tech stock strength, and it's a positive indication for earnings from the rest of the FANG stocks.