Netflix Stock Plunges After Announcing Low Subscriber Growth and Raising Prices

SAN RAMON, Calif. — Netflix delivered its latest quarter of disappointing subscriber growth during the final three months of last year, a trend that management foresees continuing into the new year as tougher competition is undercutting the video streaming leader.

Los Gatos-based company, Netflix, added 8.3million worldwide subscribers in October and December, which was about 200,000 less than the management predicted. Besides releasing its fourth-quarter results Thursday, Netflix also projected an increase of 2.5 million subscribers during the first three months of this year, well below analysts’ expectations for a gain of 4 million, according to FactSet Research.

The disappointing news caused Netflix’s stock price to plunge by about 20% in extended trading after the numbers came out, deepening a steep decline during the past two months.
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After enjoying eye-popping profits during the 2020 pandemic lockdowns that brought homebound individuals to Netflix, it was a difficult year.

Netflix added 18.2 Million global subscribers in 2021. It was the slowest annual growth pace it has seen in five years. This was after Netflix had more than 36,000,000 subscribers in 2020. It now has almost 222 million subscribers in the world. This is more than any video streaming company.

However, other companies like Apple and Walt Disney Co. are making an inroads. In recent years, a number of networks have also been making inroads into video streaming to gain attention and budget share. Netflix has expanded into video games because of the growing competition.

“The 2022 backdrop for Netflix seems to have been set with a theme of competition abound,” said Third Bridge analyst Joe McCormack.

While acknowledging the competition is having a “marginal” effects on its growth in i ts quarterly shareholder letter, Netflix emphasized its service is still thriving in every country where it’s available.

Netflix executives stated that future growth is more uncertain due to the uncertainty in the recent pandemic.

COVID “has created a lot of bumpiness,” co-CEO Ted Sarandos said. The company’s other co-CEO, Reed Hastings, also expressed some frustration before adding, “For now, we’re just like staying calm and trying to figure (it) out.”

The company’s financial performance is good despite the slowdown. Even though profit margins are shrinking and cash is being spent on original programming in order to draw subscribers, it is still doing well. Netflix’s fourth quarter earnings were $607 million or $1.33 per diluted share. That is an increase of 12% over the year before. Revenue rose 16% to $7.7 trillion in the fourth quarter.

However, investors are becoming more concerned that Netflix could be reaching its peak popularity. Those concerns have caused Netflix’s stock price to plummet by more than 40% from its peak of roughly $700 reached in mid-November.

The opportunities for future growth have become particularly tough in Netflix’s biggest market — the U.S. and Canada — where it’s starting to appear that most households interested in subscribing to the service already have an account. Netflix had 75.2 million subscribers to its service in America and Canada in 2021, which translated into an insignificant gain of just 1.3 million subscribers over the previous year.

Last week, Netflix raised its price by roughly 10% within the U.S. and Canada — a move that could cause some subscribers to cancel the service, based on the company’s past history with previous price hikes.

On the upside, Netflix on Friday will unveil the fourth season of “Ozark,” one of its most popular series and a potential magnet for new subscribers.


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