The Netflix stock takes another dip as Giant’s streaming posts the first-quarter subscriber reversal

Shares of Netflix fell more than 20% in after-hour trading on Tuesday after the company announced that it lost its place in terms of subscribers in the first quarter of 2022 and dropped to 221.64 million across the board. world.

Usually the question when Netflix releases the numbers is how many new customers it has managed to acquire. This time around, its global customer base shrank by 200,000, of which the company closed 2021, an unusual change far from the internal forecast of 2.5 million additions during that time.

This is the first downside to subscriber levels in over a decade, and the pain is unlikely to end anytime soon: Netflix also said it expects to record another 2 million losses in the current April-June quarter.

Wall Street analysts had expected 2.51 million new subscribers to join Netflix, which would already be a weaker growth rate than what the company has seen in recent quarters. But the loss of subscribers wasn’t something even the bears dared foresee.

Street also expected more in terms of revenue from the streaming giant, with analysts asking for $ 1.93 billion. Netflix posted revenue of $ 7.868 billion in the first quarter, down 10% from a year earlier, while earnings per share fell 6% year-over-year to $ 3.53. The EPS ratio was at least $ 2.90 higher than analysts’ expectations.

Investors punished Netflix’s already broken stock, sending it to $ 270 after finishing a normal trading day at $ 348.61.3%. They lost more than 40% of their value in 2022 due to wider rotations of technical titles and concerns about Netflix’s growth potential. A similar pattern followed the company’s previous quarterly earnings report in January last year. After weaker than expected numbers, the stock fell by more than 20%, where it remained substantially in the following months.

Netflix’s numbers clearly outpaced streaming competitors, but not close enough to have investors punishing the DTC leader. Disney, Warner Bros. Discovery, and Paramount Global all closed above today’s session, but are now all priced at $ 3-5 $ in after-hour trading.

“Our revenue growth has slowed significantly, as our results and forecasts below show,” the company said in a quarterly letter to shareholders. “Streaming is straightforward, as we expected, and Netflix titles are very popular globally. However, our relatively high household penetration, when it includes a large number of shared family accounts, in the face of competition creates resistance to revenue growth.

Recently, Netflix has been reluctant to acknowledge the multibillion-dollar influence of competitors like Disney +, HBO Max, Apple TV +, and Peacock. However, this quarter’s letter made the recognition of the saturated market clearer.

“Over the past three years, as mainstream entertainment companies realized that streaming is the future, many new streaming services have also been launched,” the company said. “Although our share of television viewers in the United States, for example, has grown steadily according to Nielsen, we want to grow that share faster.” In February 2022, Netflix reported 6.4% of its total streaming time to the TV screen, up from 6% in May 2021, according to Nielsen’s chart included in the earnings letter.

The Russian invasion of Ukraine, as well as the ongoing effects of Covid, are weighing on results, the company said, estimating the impact with a loss of around 700,000 subscribers over that period. Netflix, like many companies, has decided to suspend operations due to the Russian invasion, having developed local language production and a small subscriber base there.

In a multi-part statement on revenue and subscriber stagnation, the company cited “factors we don’t directly control” such as related TV trends and data costs. “We believe these factors will improve over time so that all broadband households become potential Netflix users,” the letter said to shareholders.

In an earlier January earnings report, Netflix warned that first quarter results could be slightly weaker. The company blamed “the latest weighted content list” with similar headlines. BridgetonThe second season e the Adam project Both will start in March, giving them less time to raise their quarterly rates. Growth in acquisitions, Netflix said, continues to weigh on Covid and “macroeconomic difficulties” in regions like Latin America.

While Netflix continues to be a strong subscriber in the race for general streaming, it faces more competition than ever from Disney, Warner Bros. Discovery, and a few others.

As its North American operations declined, Netflix responded with several initiatives. Earlier this year, it phased in the latest price hike, making its most popular subscriber level, $ 15.49, the most expensive share in the market. It also began testing additional fees for sharing passwords in three Latin American countries. This is a potential prelude to overcoming the practice of suppressing global efforts, which cost billions in revenue to billing providers.

A letter from a shareholder said it would be a priority to determine how the exchange’s monetization should take place, and Netflix estimates that there are currently more than 100 million households using another family account, including around 30 million in the United States. .and Canada. “This is a great opportunity because these families are already watching Netflix and enjoying our service.”

The company has also stepped up its efforts in video games and interactive programming, trying to improve subscription offers and prevent the cancellation of restless customers. The deal was announced on Monday. blown kittens It’s a sign of the times because it includes both a game and a property-based series.

Globally, of course, Netflix has room to grow and has once again demonstrated its programming strategy with shows like squid game – Produced in a local market, but aimed at the whole world – gives you a competitive advantage.

Netflix claims password sharing solution a year ago; Reed Hastings promises to “return to investor goodwill”

The good news for Wall Street was free cash flow, which was $ 802 million, up from $ 692 million a year earlier. The company continues to expect this to be positive cash flow throughout 2022 and beyond.