Netflix will crush subscriber growth targets with its biggest quarter of all time, Goldman Sachs forecasts


After a rocky 2019 for subscriber growth, analysts at Goldman Sachs estimate Netflix will close the year with its biggest quarter yet.

Goldman Sachs, which has a buy rating for Netflix, expects the streaming company to add 9.7 million paid net subscriber globally when it posts results for the fourth quarter on January 21, the Wall Street firm said in a note to investors on Tuesday. 

The estimate is well above Netflix's own forecast of 7.6 million global paid net additions, and FactSet consensus of 7.8 million. Since 2012, Netflix has routinely beat its own guidance for the fourth quarter, the report showed.

Netflix's fourth quarter will be closely watched by analysts and industry experts to see how the streaming company is holding up against competition from streaming services like Disney Plus and Apple TV Plus that launched during the period. Investors have also feared that Netflix is hitting a wall for subscriber growth in the US. And the industry has been eager to see how major film releases, like Oscar-nominated "The Irishman," will bolster subscriber growth.

Goldman Sachs expects a boost during the fourth quarter from Netflix's "strongest content slate to date"

If Netflix meets Goldman Sachs' expectations, the fourth quarter would mark the highest quarterly paid subscriber growth in the company's history.

Netflix's biggest quarterly subscriber haul to date was in the first quarter of 2019, when it added 9.6 million paid subscribers globally.

Subscriber growth at the streaming company has been tumultuous since. Netflix missed its subscriber-growth targets in the second quarter of 2019, after it rolled out price hikes globally. It rebounded in the third quarter despite another slight miss.

Analysts at Goldman Sachs expect a boost during the fourth quarter from Netflix's "strongest content slate to date."

The note highlighted original-film releases including "The Irishman," "Marriage Story," "6 Underground," "El Camino: A Breaking Bad Movie," "The King," "Dolemite Is My Name," and "The Two Popes." It also called out premieres and new seasons of shows like "You," "The Witcher," "The Crown," "Big Mouth," and "End of the F**ing World."

Goldman Sachs based its subscriber growth estimates on data including Netflix's previously reported paid net additions, mobile-app data collected by analytics firm Sensor Tower, and the Wall Street firm's own analysis of the correlation between content spending and subscriber growth at Netflix.

Other analysts' estimates have been more cautious

Goldman Sachs' subscriber-growth estimate is one of the more optimistic projections for Netflix's fourth quarter.

Other analysts have been more cautious amid the streaming company's growing competition.

J.P. Morgan Chase expects Netflix to slightly surpass its guidance with 7.7 million paid net subscriber additions. Monness Crespi Hardt analyst Brian White expects Netflix to come in 900,000 short of its projections. 

Analysts at Cowen expect Netflix to hit or exceed its 600,000 paid-subscriber-addition target in the US during the fourth quarter, after it surveyed US consumers and discovered that the launch of Disney Plus may not have hurt Netflix as much as Cowen analysts previously thought. 

Meanwhile, data from SimilarWeb, which tracks mobile-app usage on Android devices internationally, suggests possible weakness abroad, as Business Insider previously reported. The data showed that estimated daily active users, which can help analyze subscriber trends, dropped off from the third quarter to the fourth in key regions including Brazil and India.

Goldman Sachs, which is expecting Netflix to beat in both the US and internationally, factored the new competition, as well as price hikes that Netflix rolled out earlier in the year, into its estimates.

There were no major price hikes during the fourth quarter that might have stalled growth, as in previous periods.

"The content additions to the platform, in particular what we believe was Netflix's highest-quality original release slate to date, drove this outperformance, despite the lingering impact of last year's price increases and high-profile competitive launches, and should continue to do so as these cash content investments pay off," the note said.

The investment firm is also expecting a strong showing from Netflix during the first quarter of 2020.