Netflix 4Q - Dominating Streaming

On Tuesday Netflix reported fourth quarter numbers which smashed expectations. When talking about Netflix and expectations we are talking about subscriber numbers. Unlike free sites like Facebook, Netflix subscribers are paying monthly premiums for the content. Subscriber growth is key for their financial success.

Consensus expected 6.2 million added subscribers for the quarter, Netflix added 8.5 million! This is important because after a big surge during lockdown, the 3rd quarter was rather disappointing. With hindsight, that was a small blip in the fast-growing curve of additions, now sitting at 204 million loyal subscribers.

Another important announcement was their ability to fund new content with their own money. They no longer need to go to the bond market and borrow funds. Management are so confident about their cash flow position that they even announced a share buyback programme. Many analysts were concerned with Netflix's deep debt hole needed to fund content creation. They have reached a point where they can start paying that debt back.

Queen's Gambit was my favourite show of 2020. I am still watching The Crown which is also turning out to be brilliant. There is room for a few players in the streaming wars but we believe Netflix will be consistently among the best. The share price is up 17% on the results after being flat for 6 months. We still see it as a strong buy at these levels.