Shares of Netflix fell more than 11% after the close of trading on Tuesday, as the low number of new users of the streaming giant disappointed investors.
Market analysts predicted a decline, but did not expect it to be so strong. In 2020, Netflix, on the one hand, received an incredible increase in users of 15.8 million to more than 200 million when people in quarantine were looking for entertainment at home, on the other hand, its film production was stopped for a long time and resumed only in recent years. several months.
Netflix shares have risen 25.6% over the past 12 months and only 1.63% since the beginning of 2021, while the Nasdaq Composite technology index has risen 66.84% over the past 12 months and almost 7% since the beginning of the year.
The dynamics of the change in shares of Netflix since July last year is reminiscent of roller coasters, as investors assessed how justified their strong growth at the beginning of the pandemic, as well as pressure from competitors and future growth prospects.
Netflix said it added 3.98 million new global subscribers in the first quarter of 2021, while analysts expected 6.2 million more. This is Netflix’s lowest quarterly result since 2013, compared with 8.5 in the previous fourth quarter. million new global subscribers.
Wall Street did not expect the decline to be so strong, although Netflix executives warned that growth would slow given the mass vaccination against COVID-19 and return to normal life, and experts noted that it is becoming more difficult for large companies to keep growth high.
Netflix said the decline was due to a long shutdown in film production last year, which will reduce the amount of new content on the streaming platform in the first half of 2021.
At the same time, the company’s management indicated that the situation will change in the second half of 2021, as Netflix has resumed filming and film production is operating in almost all major markets. If this continues, Netflix has said it plans to spend more than $ 17 billion on content this year.
The company also said it did not believe that increased competition had led to a decline in the number of new paid subscribers. Netflix’s biggest and fastest-growing rival is the Disney + (DIS) streaming service, which has more than 100 million subscribers, and also has HBO Max from AT&T (T), Apple TV + (AAPL), and Amazon Prime ( AMZN) and Peacock from Comcast (CMCSA) NBCUniversal.
Despite the slowdown in the growth of new subscribers, Netflix reported a jump in net profit more than twice and profit growth of 24% to a new high. Netflix earnings in the first quarter of 2021 rose 139% to $ 3.75 per share against analysts’ expected $ 2.97. Quarterly revenue rose to $ 1.71 billion from $ 709 million a year earlier. Netflix revenue rose 24% to $ 7.16 billion, also above Wall Street averages of $ 7.13 billion.
For the coming quarter, Netflix has lowered its expectations for the number of new paid global subscribers, saying it hopes to add only about 1 million.
Netflix has also approved a share repurchase program worth up to $ 5 billion starting in 2021 without a fixed expiration date. It is expected to begin this quarter, the company said.
Despite strong competition in the UCAN region: USA and Canada, Netflix continued to increase its subscribers there, as it did worldwide in the first quarter (excluding the impact of exchange rates). This indicates that the industry leader still holds strong positions.
Temporary changes associated with the arrival of the pandemic and subsequent vaccination will pass, and consumers will still appreciate quality content on streaming platforms. Netflix relies on this, so it is preparing a lot of new and recently signed a contract with Sony Pictures for 5 years with the right to broadcast new products after their release in theaters.
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