2021/01/21
Netflix, golden times of Covid lockdowns over? Stock falls 20% on Wall Street after disappointing report.
For Netflix, the golden times experienced in the darkest period of Covid seem long gone, as was predictable. The streaming giant was confirmed as one of the winners of the pandemic, benefiting from the various measures of restrictions, culminating in a lockdown and a 'stay at home' diktat and launched especially in 2020 and early 2021, in order to stem the spread of the virus.
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In those months, millions of consumers around the world, forced to stay in their homes, found other ways to spend their free time: and the boom in subscriptions to Netflix, as well as to other indoor entertainment services, flew. But that period has passed.
With the arrival of vaccines, consumers have rediscovered outdoor activities and the 'reopening' stocks have prevailed, in spite of the 'lockdown' stocks.
The numbers of the latest Netflix quarterly confirm the end of the golden period, already taken into account.
Also pay attention to the comparison with the budget of the third quarter, when the expectation for Squid Game was very high, the Korean television series that in a few days after its landing became a sort of global obsession, amusing adults passionate about the genre and making the hair for fear at several parents.
In this regard, co-CEO and head of the content unit Ted Sarandos revealed that the second season of the series will be: "Absolutely", he said in response to a question: "The Squid Game universe has begun" .
Squid Game is confirmed as the most watched television series in Netflix's history.
It is the outlook that Netflix issued, at the same time as the publication of the quarterly, which disappointed the market, already displaced by the numbers relating to the growth of subscribers during the fourth quarter of 2021: the worst is that, for the first quarter of 2022, the American streaming giant estimates a slower-than-expected growth in subscribers.
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The reaction of the Netflix stock, which collapsed in afterhours trading on Wall Street by 20%: a decline that, a MarketWatch article points out, means that a capitalization of almost $ 45 billion has gone up in smoke, on a total market value that, at the end of yesterday's trading day, it was over $ 225 billion.
It is worth underlining in this regard that the Netflix stock has lost more than 12% over the last 12 months, clearly underperforming the S&P trend which, over the same period, has grown by 17%.
But let's get to the key numbers, those of the growth of new subscribers in the fourth quarter and in the whole of 2021: in the fourth quarter of 2021, the number of Netflix subscribers grew on a net basis by 8.28 million units, better than the growth of 8.19 million estimated by analysts. However, the number falls short of Netflix's growth of 8.5 million subscribers exactly the previous year, in the fourth quarter of 2020.
In addition, in the whole of 2021, the growth was 18.2 million new subscribers, less than half of the new subscribers that Netflix had managed to attract in the first six months of 2020.
The outlook is disheartening: for the first quarter of 2022, the group expects an increase in new subscribers, on a net basis, of just 2.5 million units, definitely below the 3.98 million new subscribers of the first quarter of 2021, and even worse than the +6.93 million expected by analysts, according to StreetAccount estimates. The analysts interviewed by FactSet had expected an even higher number, equal to +7.25 million subscribers.
There is, in fact, a justification, and it has been given by the same leaders of the American giant: if during the period of the Christmas season, the giant has uploaded new content, including the new seasons of some popular TV series, such as " The Witcher ", and" Emily in Paris ", also adding important films, such as" Don't look up "and" Red Notice ", for the first quarter of 2022 no big news are expected.
In a letter to shareholders, the company admitted that the "guidance reflects a more thoughtful content selection for the backend (for example, 'Bridgeton' 52 and the new original new film 'The Adam Project' will both be launched in March. ) ".
Netflix also noted that "although loyalty and engagement are in good health, the growth in acquisition (traffic) has not yet accelerated to pre-Covid levels". And "we believe that this may be due to various factors, such as the continuing persistence of Covid and the macro-economic difficulties in various parts of the world (particularly in Latin America).
Regarding the numbers for the whole of 2021, in the financial statements released by Netflix we read that "the turnover of the whole year, equal to $ 30 billion, marked a growth of 19% on an annual basis, while the operating profit stood at $ 6. , 2 billion, up by 35% on an annual basis ".
In all, the group "completed the fourth quarter with a number of subscribers of 222 million (with an addition of 8.3 million in the fourth quarter)".
In the fourth quarter of 2021 alone, Netflix reported earnings of $ 607 billion, or earnings per share of $ 1.33, doing far better than the 82 cents per share expected by analysts surveyed by Refinitiv, and up from $ 1.19 per share. for the same period of the year 2020. Revenue stood at $ 7.71 billion, as predicted by the consensus, up 16% yoy, compared with an operating margin amounted to 8%, down six percentage points on an annual basis. In the whole of 2021, the operating margin grew to 21% from 18% in 2020.
The giant commented on the results stating that, "even in a world of uncertainty and growing competition, we are optimistic about our long-term growth prospects, with streaming continuing to supplant linear entertainment around the world. to improve Netflix so that we can satisfy our customers, and to drive this transition. "
Regarding the increasingly fierce competition from its rivals, the company admitted that this was a contributing factor to the slowdown. That said, Netflix has also said in the past that competition from Apple and Disney "was not going to have a major effect on its growth."
"Consumers have always had many choices regarding how to spend their free time, and the competition has only intensified over the past 24 months, with entertainment companies around the world developing their own streaming offerings - had the group specified - Although increased competition may affect our growth in some way, we continue to grow in each country and region where these new streaming alternatives have been launched. "
A few days ago Netflix stood out for announcing that it raised the monthly cost of its basic subscription in the United States and Canada by $ 1 to $ 9.99.
The cost of the premium plan has been raised from $ 17.99 to $ 19.99, while the standard subscription now costs $ 15.49, up from $ 13.99 previously.
Michael Zippo
https://linkedin.com/in/michael-zippo-9136441b1
info@e-book.business
Sources: Finanza.com
The fourth edition of ITIL (IT Infrastructure Library) was presented by Axelos in February 2019. The ITIL v4 (PDF and other versions available) focuses on practical aspects of IT management and provides a holistic approach with emphasize on Agile, DevOps and digital transformation topics.
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