Netflix reports mixed subscriber growth

U.S. continues to slow; Q4 cash burn to hit record levels

Neil Macker, CFA 17 October, 2019 | 9:52AM

Netflix (NFLX) posted a mixed third quarter, as subscriber growth came in slightly below guidance and our expectations, but revenue was just ahead of our projections. The firm burned US$551 million during the quarter, down from a loss of US$859 million a year ago. However, management maintained its 2019 free cash flow loss target of US$3.5 billion, implying a cash burn of US$1.9 billion in the fourth quarter which would be a single quarter record. While continuing to insist the cash burn will decrease in 2020, management admitted that Netflix will move “slowly” toward positive free cash flow. We are retaining our narrow moat rating and fair value estimate of US$135.

Netflix’s streaming subscriber base continues to grow, ending the quarter at more than 158 million global paid subscribers, up from 130 million a year ago. Subscriber growth in the U.S. was weaker than expected (0.52 million net additions versus guidance of 0.80 million) while the international segment came in just ahead of guidance (6.3 million net adds versus guidance of 6.2 million).

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Netflix Inc487.35 USD3.70

About Author

Neil Macker, CFA

Neil Macker, CFA  Neil Macker, CFA, is a senior equity analyst for Morningstar.

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