Netflix Inc. returned to Earth after stratospheric gains during the opening months of the COVID-19 pandemic.
The streaming giant on Tuesday reported 3.98 million net new paid subscribers in the first quarter, down from 8.5 million in the previous quarter, and well below the 6 million the company forecast three months ago. In the same quarter a year ago, Netflix reported the addition of a record 15.77 million paid subscribers.
For the current quarter, Netflix NFLX,
expects only 1 million net new streaming customers, which would be the lowest total of the company. According to FactSet records, the current net profit for streaming subscribers is currently just over 1 million in the second quarter of 2013.
According to FactSet, analysts expected 6.34 million new subscribers in the first quarter and 4.2 million in the second quarter. The news sent Netflix shares down 9% in after-hours trading, with prices at a point below $ 500.
A delivery seems inevitable after a national exclusion locked consumers at home for more than a year, where they went en masse to streaming services for entertainment. Netflix reported an annual net profit of 36.6 million subscribers to 203.7 million last year, which executives noticed when discussing the latest results.
“We believe that growth in paid membership has slowed due to the large COVID-19 deduction in 2020 and a lighter content ladder in the first half of this year, due to COVID-19 production delays,” he said. Netflix executives wrote in a letter to shareholders. a summary of the disappointing performance in the first quarter.
“It honestly comes down to COVID,” Netflix chief financial officer Spencer Neumann said in a video conference late Wednesday. “It creates short-term turmoil with business trends.” In the long run, however, the increase in streaming will replace linear TV around the world, he added.
While fewer new subscribers subscribed, Netflix made more money from increased subscriber rates. According to FactSet analysts, Netflix has earned $ 1.7 billion, or $ 3.75 per share, against expectations of $ 2.98 per share. Netflix’s revenue rose 24.2% to $ 7.16 billion, beating estimates of $ 7.14 billion.
With over 200 million subscribers, the trick now is to hold them and make money from it. One clear way is to increase subscription fees, as Netflix did in the US and Canada in February; another thing is to cage shared accounts to eliminate more memberships per household.
Read more: Your streaming subscriptions have changed Disney and Netflix in turbocharged form – now you’re making more money
For investors, Netflix promises to pledge $ 5 billion in share buybacks this year. According to FactSet, the company has not repurchased any shares since the end of 2011.
Netflix has held more than its own holdings in a streaming market that includes competitors Walt Disney Co., DIS.
Apple Inc. AAPL,
Comcast Corp. CMCSA,
Amazon.com Inc. AMZN,
and AT&T Inc. T,
But with millions of Americans being vaccinated for COVID-19 and the economy starting, the question remains whether people are still getting their entertainment at home or venturing to vacation spots, movie theaters, restaurants and sports venues.
“Combined with the mitigating restrictions on the shutdown, Netflix could face increasingly strong winds in the next few quarters as consumers shy away from their devices in favor of the outdoors,” warns analyst Peter Hanks of the DailyFX news and research website .com.
The Silicon Valley streaming giant says it plans to spend more than $ 17 billion in cash on content this year, and it expects paid membership growth to “accelerate” in the second half of 2021, as it popular programs such as e.g. “Sex Education,” “The Witcher,” “La Casa de Papel” (also known as “Money Heist”), and “U.” It’s also ready for films such as ‘Red Notice’, starring Gal Gadot, Dwayne Johnson and Ryan Reynolds, and ‘Don’t Look Up’, starring Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet and Meryl Streep.
“We’ve been going smoothly like her for ten years,” said Reed Hastings, co-CEO of Netflix.
Netflix shares have risen 1.6% so far this year, while the broader S&P 500 index SPX,
achieved 10% in 2021.