Netflix’s shares down 20% due to decreasing subscriber growth

After the bell on Thursday, Netflix released its fourth-quarter earnings. On slowing subscriber growth, the streamer beat on both the top and bottom lines, but shares fell more than 20% in after-hours trading, to their lowest levels since June 2020.

The essential numbers are as follows:

Earnings per share (EPS): $1.33, compared to 82 cents projected by analysts in a Refinitiv poll.
According to Refinitiv, revenue was $7.71 billion vs $7.71 billion predicted.
According to StreetAccount estimates, global paid net subscriber additions were 8.28 million vs. 8.19 million projected.

In the fourth quarter, Netflix added 8.28 million paying net customers throughout the world. According to StreetAccount projections, analysts projected the company to add 8.19 million. However, this is less than the 8.5 million customers Netflix attracted in Q4 2020, which was the same figure it predicted for Q4 2021, and the outlook was much worse.

Netflix aims to attract 2.5 million customers in the first quarter of 2022, down from 3.98 million in the first quarter of 2021. According to StreetAccount projections, analysts projected 6.93 million in the first quarter.

Netflix has announced a more back-end-heavy content lineup for the first quarter, with major launches scheduled for March.

However, this is similar to the picture Netflix painted moving into the fourth quarter. When Netflix released new TV episodes and movies that had been pushed to the back half of the year at the end of 2021, observers predicted a significant increase in consumers. Netflix, for example, produced high-performing material such as “Emily in Paris,” “Don’t Look Up,” “Red Notice” and “You” during the quarter.

Netflix attributed the slowdown to greater competition from other companies, while previously claiming that companies such as Apple and Disney will have no substantial impact on growth.

“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” according to Netflix. “While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”

In after-hours trade, Disney and Roku both lost more than 4% of their value.

Netflix has stated that it is still early days in terms of targeting the 800 million to 900 million households that use either broadband internet or pay-TV.

“It’s definitely frustrating for us, the current slower growth,” co-CEO Reed Hastings said during a pre-recorded earnings interview. In the fourth quarter, the firm recorded 222 million paying memberships.

“It’s a dynamic market for sure, it may not be as steady as people think about it in terms of we’re gonna add X number every quarter, every month, every week, but there’s no question that’s the direction the business is going in,” co-CEO Ted Sarandos added.

Last week, Netflix announced pricing increases in the United States and Canada. The monthly cost of the basic plan increased by $1 to $9.99 in the United States. The ordinary plan has increased in price from $13.99 to $15.49, while the premium plan has increased in price from $17.99 to $19.99.

As users get increasingly invested in Netflix’s exclusive content, the company’s objective is to raise rates. Price hikes may be used to compensate for slowing consumer growth.

Investors were also given an update on Netflix’s gaming efforts. To its subscribers, the firm has been publishing games based on its successful titles. The new games could help it figure out which characters are the most popular, which could help it influence its content in the future.

COO Greg Peters remarked, “We’re now really getting to learn from all of those games.”