Netflix tanks again as investors question growth prospects
Netflix shares continued to slide on Friday, tumbling 22% a day after the streaming video service announced a slowdown in subscriber growth.
The company's stock price also fell 20% on Thursday in after-hours trading when Netflix disclosed that it expects to add just 2.5 million customers in the first quarter, undershooting analyst forecasts of 4 million, according to FactSet Research. Netflix added 8.3 million worldwide subscribers between October and December, roughly 200,000 fewer than it had projected.
Shares closed the Friday session at $397.50, down from a 52-week high of more than $700 in late October. The stock has fallen 32% over the last year.
Netflix is coming off what would be considered a strong 2021 for many other companies, when the COVID-19 pandemic drove more Americans to embrace streaming. Yet while the service gained more than 18 million subscribers last year, that represented its slowest pace of annual growth since 2016. Over the last five years, the platform has added an average of 26.5 million users annually, according to investment research firm MoffettNathanson. In 2020, Netflix added more than 20 million users.
"It's tough to say exactly why our acquisition hasn't kind of recovered to pre-COVID levels," Netflix Chief Financial Officer Spencer Adam Neumann told analysts in a call on Thursday to discuss the company's fourth-quarter results. "It's probably a bit of just overall COVID overhang that's still happening after two years of a global pandemic that we're still unfortunately not fully out of [and] some macroeconomic strain in some parts of the world, like Latin America in particular."
Netflix now has roughly 222 million subscribers worldwide, making it the leader by far in an increasingly competitive streaming market.
Still bullish
Despite Netflix's challenges, many Wall Street investors are still bullish on its prospects. Analysts at BofA Global Research said the shortfall in new subscribers suggests management is having a harder time forecasting growth, rather than a sign the company is hitting a wall. UBS analysts also expect Netflix to continue expanding overseas as it invests in local content.
Netflix faces a tougher slog growing in its biggest market — the U.S. and Canada. Some experts see fewer opportunities to add customers, especially amid mounting streaming competition from companies ranging from Apple and AT&T to Disney and ViacomCBS (owner of CBS News). Netflix has more than 75 million subscribers in the two countries, but added only 1.3 million in the region last year.
The Associated Press contributed to this report.
