Netflix (NFLX) soared post-earnings in January, but then pulled back and has largely been in a holding pattern since. The shares are also still only at levels first hit in July 2020.
That might spell a relatively low bar for the streaming giant to clear as it reports on Tuesday afternoon.
The current FactSet consensus is for Netflix to report 6.31 million in first-quarter paid net streaming adds -- a little above January guidance of 6 million -- and to guide for just 4.29 million in second-quarter paid net adds. For comparison, Netflix respectively added 15.77 million and 10.09 million paid subs in the first quarter and second quarter of 2020, as COVID lockdowns drove a demand spike.
Netflix's revenue and EPS numbers typically have less of an impact on how its stock moves. But for those interested, the first-quarter revenue consensus is at $7.14 billion (up 24% annually), and the GAAP EPS consensus is at $2.97 (up 89%).
I'll be live-blogging Netflix's report, which is expected after the bell on Tuesday, as well as a "video interview" that's set to be uploaded to YouTube at 6 p.m. Eastern Time. In addition to the paid net add numbers, here are a few other things worth watching.
1. Regional Subscriber Growth and Engagement
Following a fourth quarter during which more than half of Netflix's paid net adds came from the EMEA region, analysts expect nearly half (3.06 million) to come from EMEA in the first quarter, as well as in the second quarter. 1.62 million and 1.11 million paid net adds are respectively forecast to come from Asia-Pac and Latin America in the first quarter, and a relatively modest 513,000 are expected to come from the U.S. and Canada.
Worth paying attention to: Any comments Netflix shares about how sign-ups and usage are trending in markets that have seen large vaccine rollouts, such as the U.S., the U.K. and Israel, and any comments about churn in the U.S. and other markets where Netflix recently hiked prices.
Data from research firm SimilarWeb suggests Netflix's U.S. cancellations remained low in March in spite of its price hikes. Also, Netflix's App Store and Play Store download rankings largely held steady in big markets in the first quarter, judging by data from App Annie and Sensor Tower.
2. ARPU Growth
Netflix's ARPU (referred to by the company average revenue per membership, or ARM) was flat both in dollars and constant currency (CC) in the fourth quarter. Price hikes should be an ARPU tailwind in the first quarter, as should the dollar's 2020 decline against the euro. On the other hand, forex has been an ARPU headwind in Latin America, and the adoption of cheap mobile-only plans has weighed on ARPU in Asia-Pac.
3. FCF and Content Spend
Thanks to COVID-related production halts, Netflix's cash content spend fell to $12.5 billion in 2020 from $14.6 billion in 2019. That in turn helped the company generate $1.9 billion in free cash flow (FCF), after having burned $3.3 billion in 2019.
With content spend set to rebound this year, Netflix guided in January for 2021 FCF to be near breakeven, albeit while adding it believes it will no longer need to raise cash to finance its day-to-day operations. Keep an eye on any adjustments made to the FCF guidance, as well as (if shared) any details shared about just how much Netflix expects to spend on content this year.
4. Marketing Spend
Amid lockdowns, depressed ad prices and some push-outs for originals, Netflix's marketing spend fell 13% annually in the fourth quarter to $763 million, and was down 16% for the whole of 2020 to $2.23 billion.
Amid reopenings, rebounding ad prices and a larger slate of originals, it's quite likely that Netflix's marketing spend will be up this year. And it wouldn't be surprising if marketing spend returned to growth in the first quarter, given that it was down 18% annually in the year-ago period.
5. Viewing Stats for Originals
Netflix has made it a habit to use its shareholder letter to disclose how many "member households" watched (or are projected to watch) popular originals that recently debuted during their first four weeks of availability.
In the fourth-quarter shareholder letter, Netflix shared numbers for originals such as The Midnight Sky, The Crown: Season 4, Barbarians and We Can Be Heroes. Look for stats to be shared in the first-quarter letter about new originals such as Firefly Lane and Cobra Kai: Season 3.