Netflix stock down…what’s next for the market?

Despite the efforts and adding six million net new subscribers during the first quarter, meaning 207.6 million global paid memberships, Netflix shares saw a massive decline during the late Tuesday trading. This was a result of the streaming company missing important targets, leading its shares to fall by 11.8% in after-hours trading. Netflix missed its prediction after planning to add on six million new subscribers in the March quarter, taking up the total number to 208 million subscribers – an increase of 14% since the same period last year. At the time of writing, Netflix shares (NASDAQ: NFLX) are trading at $549.57. In its end-of-quarter report, the company saw better quarterly profits but wasn’t enough to maintain the shares’ value. “Of course, the many Netflix competitors now in the market will be executing on similar plans. But with streaming investors myopically focused on subscriber counts, Netflix will still need a lot of viewers to find their way back indoors later this year,” The Wall Street Journal said. “The likes of Amazon Prime, Disney and Apple are likely to experience the exact same sort of subscriber slowdown as restrictions get eased further,” analysts added on.

The coronavirus pandemic boosted Netflix’s performance in 2020, signing up around 26 million subscribers in the first six months of last year. The company ended the year with over 195 million members. With the emergence of the virus and the lockdowns imposed in various countries, people turned to Netflix. However, in its last report, the company highlighted how revenue went up by 24% year over year to $7.16 billion whereas earnings increased from $1.57 to $3.75 per diluted share. Nonetheless, the number of new subscribers fell short from what expected by Netflix and analysts. The expected growth was heavily dependent on the loosening of restrictions. Near the end of last year, Netflix had written, “The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID.”

This year, the streaming giant released several films and series including “Bridgerton,” “Cobra Kai” and “Big Mouth”. The pandemic was blamed for the missed target. In a letter to its investors, Netflix stated, “We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays.” Moreover, Netflix CFO Spence Neumann said, “In terms of Q1 performance, it really boils down to COVID, frankly. The extraordinary events of COVID continue to have a big impact on the world and for us, at a minimum, it creates some short-term choppiness in some of the business trends that we see.” It had previously warned that its services could be slowed down as the economy would be starting up again. Other than the pandemic, Netflix also pointed out that its price hike could also be a reason why it didn’t reach its target subscribers amount. In October 2020, its most popular streaming plan increased to $13.99 a month, whilst its premium to $17.99 a month. The price now separates the streaming service from its rivals, as Disney+ costs $8 a month, and can be added with Hulu and ESPN+ for just $14 a month. Paramount+ and Discovery Plus offer free trials and have a variety of original shows. Its competitors are trading in such a way: Walt Disney Co. DIS, +0.18%, Apple Inc. AAPL, +0.29%, Comcast Corp. CMCSA, +0.91%, Amazon.com Inc. AMZN, +0.82%, and AT&T Inc. T, +0.74%. Netflix co-chief executive Reed Hastings pointed out, “We had 10 years where we were growing smooth as silk.”

What’s next for Netflix? Could this be the start of the downfall for the streaming giant? It’s too soon to determine whether Netflix’s surge, caused by the pandemic, is over or not. However, it’s interesting to keep an eye on the company and the people’s habits as the pandemic measures start to ease. The public may now prefer the outdoor activities instead of streaming. DailyFX.com’s analyst, Peter Hanks said, “Netflix may face increasingly strong headwinds in the next few quarters as consumers shy away from their devices in favour of the outdoors.” Some say that this is the end of the coronavirus boom for Netflix: “It is not quite the end of the pandemic effect for streaming services but we are beginning to see the tail end of it; it’s definitely on the wane.” They added on, “Video services are ceding ground to activities such as seeing friends and family, some sport is back, the same with cinemas and retailers, beer gardens are open. Warmer weather affects TV viewing too.” Trade experts have not given their say yet on what they recommend doing with Netflix shares, but they’ve pointed out how important it is to question growth.

Leave a Reply

Your email address will not be published. Required fields are marked *