Netflix Inc. has returned to Earth after stratospheric gains during the early months of the COVID-19 pandemic.
The broadcast giant reported on Tuesday 3.98 million net subscribers paid in the first quarter, below the 8.5 million in the previous quarter and well below the 6 million the company predicted three months ago. In the same quarter a year ago, Netflix reported the incorporation of a record 15.77 million paid subscribers.
For the current quarter, Netflix NFLX,
expects only 1 million new net transmission customers, which would be the lowest total recorded for the company. Currently, the lowest quarterly net profit for streaming subscribers is just over a million during the second quarter of 2013, according to FactSet records.
Analysts had expected 6.34 million new subscribers in the first quarter and 4.2 million in the second quarter, according to FactSet. The news caused Netflix shares to fall 9% in out-of-hours trading, with prices at one point below $ 500.
An abandonment seemed inevitable after a national shutdown for more than a year that shut down consumers at home, where they went to mass broadcasting services for entertainment. Netflix reported an annual net profit of 36.6 million subscribers, up from 203.7 million subscribers last year, which executives noted when discussing the latest results.
“We believe that the growth of paid members slowed down due to the big push forward of COVID-19 in 2020 and a lighter slate of content during the first half of this year, due to delays in the production of COVID-19, ”Netflix executives wrote in a letter to shareholders, summarizing the disappointing first-quarter performance.
“Frankly it comes down to COVID,” Netflix chief financial officer Spencer Neumann said in a video conference. “It creates a short-term sting with business trends.” In the long run, however, the increase in transmission will replace linear television worldwide, he added.
Although they subscribed to fewer new subscribers, Netflix made more money with rising subscription prices. Netflix said it earned $ 1.7 billion, or $ 3.75 per share, against expectations of $ 2.98 per share, according to analysts surveyed by FactSet. Netflix revenue soared 24.2% to $ 7.116 billion, exceeding estimates of $ 7.114 billion.
With over 200 million subscribers, the trick now is how to keep them and monetize them. One clear way is to increase subscription fees, as Netflix did in the U.S. and Canada in February; another is to crack down on shared accounts to remove more members per household.
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For investors, Netflix pledged $ 5 billion in share repurchases starting this year. According to FactSet records, the company has not bought any shares since the end of 2011.
Netflix has remained largely in a streaming market that includes rivals Walt Disney Co. DIS,
Apple Inc. AAPL,
Comcast Corp. CMCSA,
Amazon.com Inc. AMZN,
and AT&T Inc. T,
But with the vaccination of millions of Americans against COVID-19 and the opening up of the economy, the question remains whether people continue to entertain themselves at home or venture into vacation spots, cinemas, restaurants, and venues. sports.
“Combined with reduced blocking restrictions, Netflix may face increasingly strong headwinds in the coming quarters as consumers shun their devices in favor of the outside,” warns analyst Peter Hanks , from the DailyFX.com news and research site.
Silicon Valley transmission giant says it plans to spend more than $ 17 billion in cash on content this year and expects paid membership growth to “accelerate” during the second half of 2021, as increases the list of popular programs such as “Sex Education”, “The Witcher”, “The Paper House” (also known as “Money Heist”) and “You”. He also prepares 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 had ten years where we grew like silk,” said Reed Hastings, co-executive of Netflix, who added that the company’s rate of decline slowed.
Shares of Netflix have risen 1.6% so far this year, while the broader SPX index S&P 500,
has gained 10% in 2021.