Netflix Stock Declines With Subscriber Growth

Netflix Stock Price Plunged As Subscribers Dwindle

Netflix's (NASDAQ: NFLX) recent quarterly results confirmed management's prediction that the downward trend in subscriber growth would continue into this year. Tougher competition has been eroding Netflix's streaming service lead.

Netflix added 8.3 million worldwide subscribers in the fourth quarter, about 20,000 less than what management had predicted. Netflix released fourth-quarter results Thursday, but it also issued a prediction of 2.5 million new subscribers in the first three months of this year, far short of expectations for a growth of 4 million from FactSet Research.

The news was devastating, causing Netflix's stock price to plummet by about 19 percent in extended trading after the figures were released. That extended a steep slump during the previous two months.

It concluded a difficult year for Netflix, which enjoyed eye-popping gains as a result of the pandemic lockdowns in 2020 that compelled housebound people to use its services.

In 2021, Netflix added 18.2 million more subscribers around the world, its slowest rate of yearly growth in five years. It followed after Netflix acquired over 36 million members in 2020. Now that it has almost 222 million worldwide subscribers, it has a larger global subscriber base than any other video streaming service.

But other services backed by deep-pocketed rivals such as Walt Disney Co. (NYSE: DIS) and Apple (NASDAQ: AAPL)  as well as a slew of other networks, are attempting to grab eyes and a piece of family money by offering video streaming in recent years. One of the reasons Netflix expanded into video games last year was to confront increased competition.

In its quarterly shareholder letter, Netflix acknowledged that competition is having a minor influence on its growth in certain countries, but it emphasized that its service is still thriving in every nation where it's accessible.

Even as its subscriber growth slows, Netflix stock is doing well financially. Netflix earned $607 million in the fourth quarter, or $1.33 per share, up 12% from last year's fourth quarter. Revenue shot up by 16% to $7.7 billion in the fourth quarter.

On the other hand, investors are becoming more concerned that Netflix's popularity might be peaking. Those worries have caused Netflix's stock price to fall by over 30% from its peak of around $700 reached in mid-November.

In Netflix's biggest market, the United States and Canada, prospects for future development have become especially challenging, with it now seeming that most households interested in signing up for the service already have one. Netflix finished 2021 with 75.2 million subscribers in the United States and Canada, a net gain of 1.3 million subscribers over the previous year.

Last week, Netflix increased its price by roughly 10% in the United States and Canada, a move that may result in some customers canceling their subscriptions, according to the company's past history with previous price increases.

On the plus side, Netflix will premiere season four of "Ozark" on Friday, one of its most popular shows and a potential lure for new subscribers.

Loading comments...
You've successfully subscribed to MarketCents
Great! Next, complete checkout to get full access to all premium content.
Error! Could not sign up. invalid link.
Welcome back! You've successfully signed in.
Error! Could not sign in. Please try again.
Success! Your account is fully activated, you now have access to all content.
Error! Stripe checkout failed.
Success! Your billing info is updated.
Error! Billing info update failed.