What prompted Netflix shares go down?

Netflix ended 2021 with slightly lower than expected subscriber growth in the fourth quarter, and shares fell sharply with a weak outlook for the first quarter.

The streaming giant reported a net profit of 8.28 million subscribers for the last quarter of 2021, again boosted by markets outside North America, reaching a total of 221.8 million worldwide. Netflix previously forecast 8.5 million paid net passes, while Wall Street analysts expected 8.3 million, according to FactSet.

Netflix shares fell more than 20% in after-hours trading as the company projected to add 2.5 million net subscribers for the first quarter of 2022. For the first quarter, Wall Street analysts forecast a profit of 7.25 million subscribers. by FactSet.

Investors were also likely to be intimidated by the fact that Netflix, in a quarterly letter to shareholders, acknowledged that increased competition in streaming wars “may have little effect on our marginal growth”.

The smaller number of subscribers in the first quarter is probably due to the fact that some of the offered series are coming to an end, Netflix says in the letter from the shareholders. For example, the second season of “Bridgetton” and the original film “Project Adam” will start in March. In addition, the company explained to investors, “although retention of viewers and recruitment of new ones is still stable, the growth of new subscribers has not yet reached the level before KOVID.” The company attributes this to several factors, including “the current KOVID wave and macroeconomic difficulties in several parts of the world such as Latin America.”

Netflix reported fourth-quarter revenue of $ 7.71 billion (up 16%), in line with Wall Street expectations, and exceeded its net income forecast by $ 607 million (or $ 1.33 per share) against consensus estimates of analysts for EPS of 82 cents. For the whole of 2021, Netflix paid net allowances totaled 18 million – less than half of the 37 million it raised in 2020. More than 90% of net additions last year came from outside the US / Canada region.

The earnings report follows Netflix’s Jan. 14 announcement that it is raising prices in the United States and Canada – a move that will boost revenue but is likely to result in higher cancellation rates in its most mature and slow-growing region. For US subscribers, the standard plan for HD with two transmissions increases by $ 1.50 (about 11%) from $ 13.99 to $ 15.49 per month. This marks the third increase in the price of Netflix in the same number of years.

In an interview Thursday, CFO Spence Neumann noted that price increases in the United States / Canada affected lower subscribers earlier this year, while growth at the end of last year was influenced by what the company announced as “The Strongest Content Ever.” money”).

The original films that made it to the fourth quarter included Adam McKay’s “Don’t Look Up” with Leonardo DiCaprio, Jennifer Lawrence, Rob Morgan, Jonah Hill, Timothy Chalame, Tyler Perry, Cate Blanchett and Meryl Streep; action film “Red Notice” starring Dwayne Johnson, Gal Gadot and Ryan Reynolds; “The Unforgivable” starring Sandra Bullock, Viola Davis and John Bernthal. The streamer also premiered nominees for awards, such as Jane Campion’s The Power of the Dog, starring Benedict Cumberbatch; Maggie Gyllenhaal’s directorial debut “The Lost Daughter”; and “The Hand of God” by Paolo Sorentino.

“Red Notice” won the first place on the Netflix most watched movie in the first four weeks of its release, and the company has the green light for two sequels. “The Unforgivable” and “Don’t Look Up” – which set a viewing record in the first week – also topped the Netflix Top 10 Movies of All Time.

Even before the fourth-quarter earnings announcement, Netflix shares fell 14% over the past month as investors were wary of slowing down subscriber growth amid intensifying competition for streaming from Disney Plus, HBO Max, Paramount Plus , Amazon Video Prime and others.

Also as part of its earnings report, Netflix said its board of directors “has decided to evolve into a more standard management structure.” To that end, the board will recommend several changes to the next annual Netflix shareholders’ meeting, including “declassifying our board, removing the provisions of the super-majority vote on our charter and bylaws, and allowing shareholders to convene special meetings.” .

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