(BFM Bourse) – The growth in the number of subscribers and the entertainment giant’s forecasts for the last quarter of 2021 disappointed the market, which punished it very violently on Friday. Shortly after the opening, the title Netflix gives up 22.8%.
Growth stocks are tightening and the market is sending them a very clear signal this Friday: it will not forgive any slowdowns. This is evidenced by the 22.7% plunge in the Netflix stock this Friday at the opening of trade on Wall Street, thus erasing all of its gains from 2021 to fall to a low since April 2020. The group from Los Gatos erases more than $40 billion in market capitalization in this way.
In question therefore, a slowdown in the growth of its subscriber base, considered worrying by investors. The world’s No. 1 streaming company reported Thursday 8.3 million additional subscribers over the October-December period while financial analysts expected 8.4 million according to data compiled by Refinitiv. The video streaming platform now has 221.8 million subscribers, slightly less than the 222 million it expected. Above all, it only forecasts 2.5 million new subscribers for the current quarter, compared to the 4 million gained from January to March 2021. You have to go back to 2010 to find such a low figure for a first quarter, when Netflix only counted than 13.9 million subscribers.
“(Subscriber) retention and audiences remain strong but new subscriber growth has not returned to pre-pandemic levels,” admits the industry-pioneering service, which largely benefited from health restrictions in 2020 and early 2021. “We believe this is due to various factors including the Covid which continues to weigh on the economy and macro-economic difficulties in different parts of the world in particular Latin America”.
Increased competition
“There is nothing wrong with Netflix, they are just facing more and more aggressive competition. It is therefore becoming more difficult for them to distinguish themselves and attract the public”, reacts the independent analyst Robert Enderle . Over the last three months of the year, the group made $7.7 billion in revenue and earned $607 million in net profit, a figure well above analysts’ expectations, which had forecast $374 million.
Netflix was able to count on the worldwide success of the South Korean series Squid Game, viewed by more than 142 million subscribers in mid-October, a month after its release, a record. The leaders of the group have also taken advantage of this publication to confirm that there will be a sequel. Several releases of new seasons of successful series such as “Ozark” or “Stranger Things” are also planned for the 1st quarter of 2022.
The group also announced last Friday increases of between one and two dollars in its monthly subscriptions in the United States. The base option now costs $9.99, and the more expensive goes from $17.99 to $19.99. “With relatively high inflation right now, people are trying to reduce some recurring costs,” notes Robert Enderle.
A shrinking market share
Production costs also rise, and do not always pay off. Cowboy Bebop, a highly anticipated series released in November but canceled after just one season, “was a very expensive failure,” he adds. However, the platform cannot afford to invest less, while it is measured on a daily basis with major competitors, from Disney + to HBO Max (subsidiary of AT&T) via Amazon (via its Prime offer).
The emergence of these new heavyweights implies a sharp reduction in its market share in the future, according to the eMarketer firm, which estimates that Netflix collected nearly 50% of the revenue collected by video streaming platforms in 2018 but should no longer collect only 28% of these by 2023.
The company also regularly reminds that it considers YouTube and video games to be equally important threats. It also launched its own mobile games at the end of last year. “Netflix’s recent inroads into e-commerce and video games show that it is looking to diversify its revenue,” commented Paul Verna of eMarketer. However, Microsoft’s proposed acquisition of video game giant Activision on Tuesday clearly reduces the group’s prospects in this sector, at least through external growth – and resulted in a decline of 2.8 % on the stock market that day.
(with AFP)
Quentin Soubranne – ©2022 BFM Bourse
Are you following this action?
Receive all the news on NETFLIX in real time: