Heading into the first-quarter earnings report, investors have low expectations. The selling period is usually a seasonal win for the streaming giant, as demand for TV content increases during the winter months in the U.S.
The big question going into Tuesday is whether the business can return to its pre-pandemic annual expansion rate or if it is transitioning to a new phase of slower revenue gains and rising cash flow.
After the market closes on April 19 we can take a closer look at the results.
The image is from the same source.
Like many businesses that experienced a spike in demand during the earlier phases of the disease, it is taking a toll on their growth today. In the year 2020, it gained 37 million subscribers. Despite a flood of new content releases later in the year, this slowed down.
Reed Hastings and his team projected that subscriber gains will be 2.5 million in the first year of the new century, compared to 4 million a year earlier. Hastings told investors in January that they think the guidance will be accurate.
Management said that people are not signing up for the service at the same rate as before the Pandemic struck. There should be more clarity around the trends in Tuesday's announcement.
On the financial side of the business, the news has been more positive. The operating profit margin increased to 21% of sales last year compared to 18% in 2020. Free cash flow is expected to be positive in the foreseeable future.
The short-term outlook is not as strong. The company has been spending money on new areas. There is a push into video gaming.
YCharts has data on the operating margin of the NFLX.
There are signs that the strategies are stressing cash flow in early 2022, but without threatening the management goal of internally funding the business this year. The operating margin is still higher than it was a year ago.
Wall Street will be focused on management's short-term outlook, given all the questions about the company's growth potential. The executives were confused in late January, but they will be clear up by the engagement trends over the next few months.
Between 25 and 30 million subscribers were added annually before the swine flu hit. Some of the growth in 2020 was pulled forward by COVID-19. After subscriber gains slumped to just 18 million in 2021, investors want to know if the company can take a step back from its previous annual expansion rate.
Demitri Kalogeropoulos owns Netflix. The Motley Fool owns and recommends Netflix. The Motley Fool has a disclosure policy. score=26.8>Kalogeropoulos is the owner of Netflix. The Motley Fool has a recommendation for Netflix. There is a disclosure policy for The Motley Fool.
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