Netflix Shares Tumble 20% on Subscriber Growth Uncertainity, Disapointing Numbers

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

Netflix said increased competition from other companies was one reason for the slowdown, though in the past it had said companies like Apple and Disney wouldn’t materially affect growth.

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Netflix Inc shares, daily technical chart (20/01/2022)

The world’s largest streaming service projected it would add 2.5 million customers from January through March, less than half of the 5.9 million analysts had forecast, according to Refinitiv IBES data.

The company added 8.28 million global paid net subscribers in the fourth quarter. Analysts had expected the company to add 8.19 million, according to StreetAccount estimates. But that’s fewer than the 8.5 million subscribers Netflix added in Q4 2020, the same figured it had forecasted for Q4 2021, and its outlook was worse.

Netflix, wanting to attract the 800 million to 900 million households that use either broadband internet or pay-TV, said it’s still early days when it comes to reaching that number.

Shares of competitor Walt Disney Co, which has staked its future on building a strong streaming business, saw its shares sink 4%. Streaming device Roku Inc fell 5%.

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The Walt Disney Company shares, a daily technical chart (20/01/2022)

Netflix said it plans for a more back-end weighted content slate in the first quarter, with big premieres set for March.

“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,” Netflix said. “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.”

Netflix on Price Increase Spree.

Netflix announced price increases in the U.S. and Canada last week. In the United States, the monthly cost for the basic plan rose $1 to $9.99. The standard plan jumped from $13.99 to $15.49 and the premium plan rose from $17.99 to $19.99.

Netflix also updated investors on its push into gaming. The company has been releasing games based on its popular titles to its subscribers. The new games may help it gain insight into which characters are most popular, which could eventually help shape its content.

In their video interview, executives sought to reassure investors that Netflix’s long-term prospects were bright. Sarandos said the service had not seen a decline in customer engagement or retention and he projected the switch to streaming from traditional television would continue to open opportunities worldwide. The stock remained down nearly 20%.

The company is looking for new ways to attract customers including mobile video games. Netflix said it released 10 games in 2021, was pleased with the early reception and would expand its gaming portfolio in 2022.

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