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Netflix Share Price: what now as subscriber growth falls?

Netflix Share Price

Netflix expanded its viewership during lockdowns as people remained in their homes and had little else to do. This phenomenon was reflected in the company’s share price. Compared to exactly one year ago, the streaming company’s share price is up by 26% to $549.57. However, as lockdown restrictions are being eased across the world, there may now be a reversal in the company fortunes. Netflix’s share price dropped by as much as 10% in after-hours trade following the release of its Q1 earnings report, after the FAANG stock revealed that its growth in new subscriptions has taken a hit.

Earnings

Netflix has revealed that its growth in new subscriptions has fallen after lockdowns caused an initial upturn in viewers last year, while it also interrupted production of its major shows. The group added less than four million users in the quarter just gone, two million down on its expectations, warning that it could add a mere one million users in the coming quarter.

Russ Mould, investment director at AJ Bell, has suggested that customers could are exhausted by watching TV and films and now have viable alternatives for entertainment:

“One of the biggest threats to Netflix in 2021 is the great outdoors. People are bored of sitting at home under lockdown restrictions and many will have exhausted all the classic films and boxsets on Netflix by now. The flow of new films to streaming platforms is currently weak and Netflix, in particular, is really suffering from having unappealing new content,” Mould said.

“Now that lockdown restrictions are slowly being eased, the appeal of signing up to Netflix is diminishing as there are alternative activities competing for individuals’ attention, namely pubs, restaurants, domestic travel and hopefully a greater range of leisure pursuits in time.”

Content

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Investors will want to know what Netflix’s plans are to provide outstanding content in the coming months and years. And will it be it enough to support continued growth of the company?

The streaming service has allocated a budget of $17bn for 2021. It represents a significant increase from the company’s budget of $11.8bn the year before, which was reduced due the pandemic, and its budget for 2019 of $13.9bn.

“As we’ve noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second half weighted with a large number of returning franchises,” said the company in a letter to shareholders.

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