HomeNetflix Shares Take a Hit After Subscriber Miss

Netflix Shares Take a Hit After Subscriber Miss

Following impressive pandemic-driven earnings last year, Netflix reported a disappointing first-quarter subscriber growth. An estimated 3.98 million people signed up for the streaming service between January and March of this year, coming in sharply below the projected 6 million. Shares also experienced an 11% drop, causing a $25bn loss from the company’s market value. This decline does not seem to be slowing down anytime soon with the company projecting poor customer growth ahead, as the US begins to emerge from lockdown.

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Covid-19 has proven to be a double-edged sword for the international juggernaut. Netflix forms part of the elite “stay-at-home” stocks club, a cohort of publicly traded companies that flourished as a result of the pandemic forcing consumers to spend more time indoors. Stay-at-home orders helped the entertainment giant add 15.8 million new subscribers, stemming mainly from Asia where Netflix experienced a 65% increase. However, the pandemic has also caused mass disruptions within its production pipeline, which the company believes to be responsible for its recent shortfalls.

The company expects to recover, as new films and sequels to hit shows are released, including new seasons of fantasy drama The Witcher, Karate Kid spinoff Cobra Kai and psychological thriller You. The first season of The Witcher was one of the highest performing shows, drawing in 76 million Netflix subscriber households within its first four weeks on the platform. The anticipated new content will unfortunately not arrive on the platform in time to improve the company’s second-quarter earnings. Paid users are expected to grow by just 1 million during this period, compared to Wall Street’s expectations for 4.44 million.

Netflix also faces increasingly stiff competition from new streaming services entering the market, many of which have also benefited from the stay-at-home trends during the pandemic. HBO Max, owned by AT&T, reached 41 million U.S. subscribers two years ahead of schedule in January this year. While Disney+, which launched in late 2019, has already accumulated 100 million subscribers as of early March, compared to Netflix’s current 208 million.

Even with sluggish customer growth, Netflix has reported revenues of $7.16bn and net income of $1.71bn. The company is also investing heavily to expand its content production pipeline, spending $17 billion on original content in 2021. With the streaming giant assuring investors this week that it is back in production in every market around the world except for Brazil and India. Although uncertainty remains in the air, amidst the great reopening of the world, Netflix remains the clear market leader.

 

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