Shares in streaming video giant Netflix face a near 20% plunge in value on Friday night trading on Wall Street after the company’s forecast for new subscribers for the current March quarter fell far short of forecasts.
Netflix shares fell 19.9% in after-hours trading (they were down 1.48% in the regular session) after the weak forecast was revealed in the 4th quarter update. That could see upwards of $US45 billion wiped from the value of Netflix shares, and big losses among rivals such as Disney, Discovery, ViacomCBS, Fox and Comcast.
Netflix reported 8.3 million net new paid subscribers in the fourth quarter, trailing its own forecast for 8.5 million but roughly hitting the average analyst forecast of 8.3 million, according to US data group, FactSet.
That gave the streaming giant 221.8 million subscribers overall as of the end of 2021. The final 2021 number allayed fears some analysts had kindled that Netflix would report a significant shortfall in new subscribers for the three months to December.
But analysts were shocked by the weak forecast for the current quarter – just 2.5 million net new subscribers in the first quarter, less than half the 5.8 million that analysts were projecting on average, according to FactSet.
Netflix executives said that a lack of new original programming, especially early in the quarter, was a factor in their shock forecast.
“Our guidance reflects a more back-end weighted content slate in Q1’22 (for example, ‘Bridgerton’ S2 and our new original film ‘The Adam Project’ will both be launching in March),” they wrote in a letter to shareholders announcing the results.
“In addition, while retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-COVID levels. We think this may be due to several factors including the ongoing COVID overhang and macro-economic hardship in several parts of the world.”
Netflix’s added 18.2 million new subscribers total in 2021, less than it added in just the first six months of 2020, when the Covid pandemic first spread across the globe and caused a wave of shelter-in-place restrictions.
Netflix said it sales grew to $US7.71 billion in the holiday quarter, up from $US6.6 billion in the same quarter of 2020. Profit was expected to decline as a wave of premieres required Netflix to recognize the costs of expensive content such as the newest season of “The Witcher,” but the company reported earnings of $US607 billion and up from a year ago.
