Netflix has forecast a slowdown of subscribers as we emerge out of the lockdown and completion grows.
The streaming company expects to add 2.5 million subscribers in the first quarter of 2021, which is almost half of what was estimated by analysts. In the same period last year, subscribers grew by four million.
As a result, shares plunged almost 20%.
“While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” said the group.
“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,”
“While this added competition may be affecting our marginal growth, we continue to grow in every country and region in which these new streaming alternatives have launched.”
Last year, Netflix added 18.2 million new subscribers. This is half the number it gained in 2020 amid the height of the pandemic.
“When Netflix released Don’t Look Up, was it trying to second guess what would happen when its fourth quarter numbers came out? The share price is doing exactly what was instructed by that film title – it’s looking down to the tune of a 20% decline in after-hours trading,” said Danni Hewson, financial analyst at AJ Bell.
“Fourth quarter earnings were well ahead of forecast and 8.3 million net new subscribers were better than the market consensus of 8.1 million, albeit less than the 8.5 million guided by Netflix.”
“Yet the big news was guidance for subscriber growth to slow massively, which therefore drags down earnings expectations and puts a question mark over Netflix’s goal to be cash flow positive every year from 2022.