Netflix predicts worst quarter for streaming growth in its history, stock down 9%

For the current quarter, Netflix NFLX,
-0.88%
expects just 1 million new streaming customers, which would be the lowest total recorded for the company. The lowest net quarterly earnings for streaming subscribers is currently just over 1 million in the second quarter of 2013, according to FactSet records.

Analysts expected 6.34 million new subscribers in the first quarter and 4.2 million in the second quarter, according to FactSet. The news sent Netflix shares down 9% when trading after the program, with prices at one point falling below $ 500.

A surrender seemed inevitable after a national blockade of more than a year that shut consumers down at home, where they went to mass streaming services for entertainment. Netflix reported an annual net gain of 36.6 million subscribers to 203.7 million last year, which executives noted when discussing the latest results.

“We believe that the increase in the number of paid members has slowed down due to the great trend of COVID-19 in 2020 and lighter content in the first half of this year, due to delays in COVID-19 production,” Netflix executives wrote in a letter. addressed to shareholders, summarizing the disappointing performance of the first quarter.

“It’s down to COVID, honestly,” Netflix chief financial officer Spencer Neumann said in a video conference late Wednesday. “It creates short-term unrest with business trends.” However, in the long run, the rise of streaming will replace linear television around the world, he added.

While fewer new subscribers signed in, Netflix earned more money from rising subscription prices. Netflix said it earned $ 1.7 billion, or $ 3.75 per share, compared to expectations of $ 2.98 per share, according to analysts surveyed by FactSet. Netflix revenues rose 24.2% to $ 7.16 billion, exceeding estimates of $ 7.14 billion.

With more than 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 US and Canada in February; another is to counter shared accounts to eliminate more membership for each household.

Read more: Your streaming subscriptions have reshaped Disney and Turbo Netflix – now it’s time to make more money

For investors, Netflix has promised $ 5 billion in share repurchases starting this year. The company has not repurchased any shares since the end of 2011, according to FactSet records.

Netflix has held up more than a streaming market that includes rivals Walt Disney Co. DIS,
-2.48%,
Apple Inc. AAPL,
-1.28%,
Comcast Corp. CMCSA,
+ 0.04%,
Amazon.com Inc. AMZN,
-1.11%,
and AT&T Inc. T,
-0.33%.
But with millions of Americans vaccinated for COVID-19 and the opening of the economy, the question remains whether people continue to have fun at home or venture into vacation spots, movie theaters, restaurants and sports venues.

“Combined with lower blocking restrictions, Netflix may face stronger winds in the coming quarters as consumers shun their devices in favor of the outside world,” warns analyst Peter Hanks of the news site and DailyFX.com research.

Silicon Valley streaming giant says it plans to spend more than $ 17 billion in cash on content this year and expects the number of paid members to “re-accelerate” in the second half of 2021 as it grows. list of popular programs such as “Sex Education”, “The Wizard”, “La Casa de Papel” (aka “Money Heist”) and “You”. He also prepares films such as “Red Notice” with Gal Gadot, Dwayne Johnson and Ryan Reynolds, and “Don’t Look Up” with Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet and Meryl Streep.

“I had 10 years growing up as smooth as silk,” said Netflix co-executive Reed Hastings, adding that the company’s churn rate has dropped.

Netflix shares have risen 1.6% so far this year, while the S&P 500 broader SPX index,
-0.68%
gained 10% in 2021.