- Analysts estimate EPS of $2.89 vs. $3.75 in Q1 FY 2021.
- Global paid streaming memberships are expected to rise YOY, but at the slowest pace in more than three years.
- Revenue is expected to rise, though at a decelerating pace as Netflix faces increasing competition in the streaming media market.
Netflix Inc. (NFLX) weathered the COVID-19 pandemic better than many other companies in 2020, as customers stayed home and increasingly turned to streaming services for entertainment. But the company's growth has decelerated sharply throughout 2021. Over the past several months, the company has adjusted its approach to counter this slowdown, raising prices on its services in Canada and the U.S., cracking down on password sharing, and weighing a plan to sell advertisements.
Investors will watch to see how Netflix is navigating these challenges as the company reports earnings on April 19, 2022 for Q1 FY 2022. Analysts predict that Netflix will see its quarterly earnings per share (EPS) decline for the first time since Q4 FY 2020. Revenue is expected to grow at the slowest pace in more than three years.
Investors will also focus on Netflix's global paid streaming memberships, a key measure of its monetizable user base. The company's subscriber base rose to more than 200 million in the fourth quarter of 2020, but growth has slowed significantly in the past few quarters. In Q1 FY 2022, analysts predict a continued deceleration of subscriber growth sequentially and year-over-year (YOY).
Netflix shares have significantly underperformed the broader market in the past year. After mounting a rally beginning in August 2021 and peaking in November, Netflix shares have fallen precipitously. The stock plunged further after announcing its quarterly and full-year 2021 earnings in January of this year. The shares have moved essentially sideways since then and have drifted down thus far in April. As of April 13, 2022, Netflix stock has provided a 1-year trailing total return of -36.7%, far below the S&P 500's total return of 7.4%.
Netflix Earnings History
Netflix posted a dramatic turnaround in 2021 as EPS rose 84.8%, its fastest growth since 2018. But despite that impressive number, growth decelerated throughout the year. Netflix's EPS rose 138.9% in Q1, but slowed to 86.8% in Q2, 83.3% in Q3 and 11.8% in Q4. For Q1 FY 2022, analysts predict that Netflix will report a 22.9% decline YOY in EPS.
Netflix's revenue performance in recent quarters has mirrored the general slowdown taking place in its subscriber growth. Throughout FY 2019 and FY 2020, the company reported steady revenue growth ranging roughly from 20% to 30% in each quarter. This growth began to falter after the first quarter of 2021. Growth slowed from 19.4% YOY in Q2 to 16.0% in Q4. In Q1 FY 2022, analysts predict an even slower pace as Netflix posts estimated revenue growth of 10.8%.
|Netflix Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||2.89||3.75||1.57|
|Global Streaming Paid Memberships (M)||224.5||207.6||182.9|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also focus on Netflix's global paid streaming memberships, also known as global streaming paid subscribers. The metric indicates the number of global users that have signed up and paid for a subscription to receive streaming services. Currently, streaming memberships are Netflix's primary source of revenue. But video streaming has become increasingly competitive in recent years, and Netflix now faces threats from rivals like Apple Inc.'s (AAPL) Apple TV+, Walt Disney Co.'s (DIS) Disney+, Amazon.com Inc.'s (AMZN) Amazon Prime Video, and AT&T Inc.'s (T) HBO Max. To attract new subscribers the company is spending more on content.
Despite this competition, Netflix has seen significant growth in its paid streaming memberships in recent years. In the three years encompassing Q1 FY 2019 through Q4 FY 2021, Netflix's memberships climbed from 148.9 million to 221.8 million, an increase of 49.0%. But these strong numbers fail to show that the rate of subscriber growth slowed sharply in 2021. That year, subscriber growth decelerated from 13.6% in Q1 to 8.9% in Q4. In Q1 FY 2022, analysts expect the rate to slow to 8.1% YOY.
Bloomberg. "Netflix Should Let 1,000 Apps Bloom."
Netflix Inc. "Netflix First Quarter 2022 Earnings Interview."
Visible Alpha. "Financial Data."
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 20.