Netflix shares plummet as company misses growth forecast
Netflix investors worried that the company wasn’t adding subscribers fast enough — and today they started to panic. After Netflix reported lower-than-expected subscriber numbers for the last quarter of 2021, its stock plunged nearly 20 percent.
The plunge was the lowest the stock had fallen since June 2020, CNBC noted:. Last quarter, Netflix predicted it would report 222.06 million paid subscriptions by the end of last year. Instead, the company reported Thursday that it closed the fourth quarter with 221.84 paid memberships.
It’s a small difference, but investors are concerned that Netflix – already one of the largest streaming companies out there – may find new ways to continue growing. And according to Netflix’s own estimates, subscriber growth will also be low next quarter. The company estimated it would add 2.5 million subscribers in the first quarter of 2022, up from 4 million in the same period last year.
That said, there are still a lot of people coming to and paying for Netflix. Revenue grew 16 percent year over year and paid memberships grew 9 percent year over year. But while Netflix is still growing, it’s doing it incrementally. Both subscriber numbers and revenue growth were pain points for anxious investors, especially in the US, the company’s largest market.
“While retention and engagement remain healthy, acquisition growth has not yet accelerated back to pre-Covid levels,” the company said. “We think this could be due to several factors, including the ongoing Covid overhang and macroeconomic issues in different parts of the world, such as [Latin America].”
Somewhat curiously, Netflix had little to say about the recent price hike in the US. Instead, it referred to the recent Play Something feature as an example of how the company adds value for its users. Prior to its call, the company also appeared to preemptively allay any investor concerns about increased competition over the past two years.
“While this additional competition may affect our marginal growth to some extent, we continue to grow in every country and region in which these new streaming alternatives have been launched,” the company wrote. “This reinforces our view that the biggest opportunity in entertainment is the transition from linear to streaming and that Netflix, with less than 10% of total TV screen time in the US, our largest market, has tremendous room for growth if we expand our services. can continue to improve. shift.”
Perhaps Netflix’s biggest concern is this: Growth and signups are slowing even during a quarter when Netflix premiered two of its most-watched movies ever, red notice and don’t look up. To calm investors’ nerves, Netflix will have to justify the slow growth, or at least come up with creative ways to justify its progress.