Jan 20, 2022 - Economy

Netflix stock plunges amid user growth slump

Photo: Jakub Porzycki/NurPhoto via Getty Images

Netflix's stock was down nearly 20% in after-hours trading Thursday, after the tech giant forecasted slowed user growth for the first quarter of 2022.

Why it matters: The slowed user growth suggests Netflix's enormous investment in new content may not be able to drive as many new subscribers as it used to amid increased streaming competition, especially in the U.S.

  • "While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched," the company wrote in a letter to shareholders.

Details: The company added 8.3 million new subscribers globally, which while in-line with Wall Street estimates, trailed behind its own estimates of 8.5 million.

  • "We slightly over-forecasted paid net adds in Q4," the company conceded.
  • For the first quarter of 2022 it forecasts paid net subscriber adds will be 2.5 million, nearly half of what the tech giant added during last year's first quarter.
  • The company said the lower guidance "reflects a more back-end weighted content slate" for this quarter. It notes that new hits like Bridgerton season 2 will debut in March.
  • Netflix added a total of 18 million paid new users last quarter, less than half of what it added in 2020 amid pandemic-riven lockdowns. The company said that user acquisition growth "has not yet re-accelerated to pre-Covid levels."

By the numbers, per CNBC:

  • Earnings per share (EPS): $1.33 vs 82 cents expected in a Refinitiv survey of analysts.
  • Revenue: $7.71 billion vs $7.71 billion expected, according to Refinitiv.
  • Global paid net subscriber additions: 8.28 million vs 8.19 million expected, according to StreetAccount estimates

Yes, but: Despite increased streaming saturation in the U.S., the company managed to add 1.2 million subscribers in North America last quarter, its strongest growth in the region since the beginning of the pandemic in early 2020.

What to watch: Netflix has been increasing its prices in its more mature markets as a way to boost revenue amid subscriber growth slowdowns. It says it plans to continue investing in mobile games and marketing to increase user engagement.

Go deeper ... Netflix's earnings over the past year:

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