Netflix investors haven’t been happy with the company and its recently announced 2021 final quarter report. Netflix has failed to meet its forecast for subscriber count for the last quarter of 2021, and this has caused its stocks to plummet by a staggering 20%
It seems that even before the report was released, investors were worried about the fact that the movie-streaming platform isn’t growing as much and as fast as it should. Unfortunately for Netflix, its report of subscriber additions was lower than what was projected by the company itself, and this is having a negative impact on its investors and its own stock.
Its stock plummeted nearly 20% in response to the report, and this is the lowest the stock had dropped since June of 2020. Now, let’s check the numbers.
Netflix’s forecast for subscriber additions was that it would report 222.06 million paid subscribers by the end of last year. However, the company reported that it ended the fourth quarter with 221.84 paid subscriber additions… well, the difference here is not major by any means, but it seems to have caused investors to worry.
The issue that investors are reportedly having with Netflix is its inability to find new ways to keep growing. The company’s own estimate shows that the next quarter will most likely have a low subscriber growth as well, which is not particularly encouraging news.
According to its new estimate, Netflix expects to add 2.5 million subscribers in the first quarter of this year. This estimation is down from the 4 million that the company achieved during the same period last year.
However, with all this being said, there are still many people coming to Netflix and paying for the movie streaming service. Netflix experienced revenue growth of 16% year-on-year, and paid memberships rose by 9% from last year. These numbers pretty much mean that Netflix is still growing, although a bit slower, but still, regularly.
The company noted that although subscriber retention and engagement levels are remaining healthy, the acquisition growth has not yet accelerated to what it was before the pandemic. Additionally, the company added that the slower subscriber growth could be due to factors including the pandemic and macro-economic hardships that several parts of the world are currently undergoing.
In the report, Netflix did not say much about its recent price hike in the US. Instead of commenting on it, the company pointed to its recent Play Something feature as one example of how it adds additional value for its subscribers. Additionally, the company seems to have also brushed off discussions and investors’ concerns about its rising rivals before the investor call.
Netflix stated that the added competition could be affecting the company’s growth, but despite the growing competition, it is still continuing to grow in every country and region where new streaming alternatives have launched. The company underlined that the greatest opportunity in entertainment right now is to transition from linear (basically the traditional way to watch TV programs) to streaming. Basically, with under 10% of total TV screen time in the US, which is Netflix’s biggest market, the company has loads of room to grow and improve.
However, it seems Netflix’s biggest concern is that its growth and signups are slowing down in pace even during a quarter in which it launched two of its most-viewed films, Red Notice and Don’t Look Up. The company will definitely need ways to justify the lack of acceleration in its subscriber growth or find ways to account for it to keep its investors calm.
