Netflix could see big bump in users amid coronavirus lockdowns

02 April 2020, Berlin: A young man watches series at the provider “Netflix”. To prevent infection with the corona virus, many people spend their free time at home. Photo: Britta Pedersen/dpa-Zentralbild/dpa (Photo by Britta Pedersen/picture alliance via Getty Images)

Netflix (NFLX) will report its Q1 earnings after the bell on Tuesday, and analysts are expecting the company to see explosive subscriber growth as a result of global stay-at-home orders related to the novel coronavirus pandemic.

Here are the most important numbers we’re expecting from the report compared with the company’s performance in the same quarter last year.

  • Revenue: $5.7 billion expected vs. $4.5 billion in Q1 2019

  • Earnings per share: $1.64 expected vs. $0.76 in Q1 2019

  • Global streaming net paid subscriber additions: 7 million forecasted vs. 9.6 million in Q1 2019

Netflix was one of the few companies not to pull its earnings guidance following the coronavirus outbreak, and the resulting collapse in global economic activity stemming from widespread lockdown orders.

The reason? With people stuck in their homes — unable to participate in any form of outdoor entertainment — consumers are turning to streaming video platforms like Netflix to stave off boredom and, in households with homebound children, keep their kids entertained.

In Q4, Netflix forecast that it would add 7 million users in Q1, but analysts are predicting the company will, in fact, add millions more users as a result of global lockdowns. It also doesn’t hurt that Netflix released the wildly popular documentary “Tiger King” just as stay home orders were being issued across the world.

Netflix could report global subscriber additions as high as 8.4 million in Q1, with an additional 5.8 million joining the service in Q2, Bank of America analyst Nat Schindler predicts. Meanwhile, Eric Sheridan of UBS is calling for the company to add 9.5 million users in Q1 and 5.5 million in Q2.

Credit Suisse’s Douglas Mitchelson is equally bullish on Netflix’s subscriber additions, forecasting it saw as many as 9.64 million new subscribers in Q1.

Netflix isn’t alone in seeing a benefit from stay-at-home orders. Disney+ (DIS), which launched in November 2019, announced earlier this month that it had surpassed 50 million users. That was up significantly from December, when the company reported it had 28 million subscribers.

Will new subscribers stick around?

While Netflix may have added millions of subscribers in Q1, the question remains: What happens when we are able to go outside again? Will the company be able to hold on to those new subscribers, or will they simply ditch the service once other entertainment options are available again?

According to Schindler, the new users are likely to become permanent subscribers to the service.

“We anticipate the step-up will result in a permanent increase in penetration for Netflix’s subscriber model and see its low price-point and staple nature supporting healthy fundamentals performance in a recession, even after stay-home orders are lifted,” he said.

Netflix subscriptions start at $8.99 per month, giving you the ability to stream to one TV at standard definition. A standard plan costs $12.99 and gets you the ability to stream to two televisions at HD resolutions. A $15.99 premium plan lets you stream to four TVs at once in 4K resolutions.

Disney+, meanwhile, costs $6.99 per month, while Amazon’s Prime video costs $8.99 per month, but is free with a $120 yearly Prime subscription.

Netflix, however, is going to have to contend with a period in the near future when it doesn’t have any new shows. That’s because TV and movie production around the world has more or less stalled. As a result, companies like Netflix may not have any new shows in the later half of the year.

But that isn’t going to be any different for the company’s biggest competitors.

We’ll be following Netflix’s earnings live Tuesday. Stay tuned.

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Got a tip? Email Daniel Howley at [email protected] or [email protected], and follow him on Twitter at @DanielHowley.

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