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Netflix predicts worst quarter in terms of streaming growth in its history, shares are down 10%


Netflix Inc. has returned to earth after acquiring in the stratosphere during the early months of the COVID-19 pandemic.

The streaming giant on Tuesday reported 3.98 million new subscribers paying new net fees in the first quarter, down from the 8.5 million reported in the previous quarter and far below the 6 million that The company predicted three months ago.

For the current quarter, Netflix
NFLX,
-0.88%

Only 1 million new net streaming customers are expected, which would be the lowest total on the company’s record. As noted by FactSet, the lowest quarterly net increase for streaming subscribers is now just over 1 million in Q2 2013, according to FactSet records.

Analysts expect 6.34 million new sign-ups in the first quarter and 4.2 million in the second quarter, according to FactSet. The news sent Netflix shares down 11% in after-hours trading, with prices dropping below $ 500.

The seemingly inevitable drop after locking the country for more than a year left consumers at home shutting down, where they turned to mass-streaming services for entertainment. Netflix reported one Annual net income from 36.6 million subscribers to 203.7 million last year, something the executives took note when discussing the latest results.

“We believe that paid membership growth will slow down due to a large COVID-19 extension in 2020 and lighter content media in the first half of this year, due to COVID-19 production delays,” Netflix executives write in one letter to shareholders, summarizing disappointing performance for the first quarter.

“In the short term, there is some uncertainty from COVID-19; In the long run, the rise of streaming to replace linear television worldwide is a clear trend in entertainment, ”the letter wrote.

While fewer subscribers were newer, Netflix made more money from raising subscription prices. Netflix said it made $ 1.7 billion, or $ 3.75 a share, compared with expectations of $ 2.98 a share, according to analysts polled by FactSet. Netflix’s revenue grew 24.2% to $ 7.16 billion, beating an estimated $ 7.14 billion.

With over 200 million subscribers, the trick now is how to retain them and make money from them. One obvious way is to increase subscription fees, as Netflix did in the US and Canada in February; Another way is to break down shared accounts to draw more members per household.

Read more: Your streaming subscriptions have reshaped Disney and enhanced Netflix – now you’ll make even more money

For investors, Netflix has promised to buy back $ 5 billion of shares starting this year. The company has not bought back any shares since the end of 2011, according to the FactSet filing.

Netflix already has more than that in the streaming market that includes rivals Walt Disney Co.
DIS,
-2.48%
,
Apple Inc.
AAPL,
-1.28%
,
Comcast Corp.
CMCSA,
+ 0.04%
,
Amazon.com Inc.
AMZN,
-1.11%
,
and AT&T Inc.
T,
-0.33%
.
But with millions of Americans already vaccinated and the economy open, the question remains whether people will continue to entertain themselves at home or venture to resorts, movie theaters, restaurants and sports venues. or not.

The Silicon Valley streaming giant says it plans to spend more than $ 17 billion in cash on content this year, and it expects paid membership growth to “accelerate again” in half. late 2021 as they ramped up a slew of popular programs like “Sex Education”, “The Witcher”, “La Casa de Papel” (aka Money Heist) and “You”. It is also available for films like “Red Notice,” starring Gal Gadot, Dwayne Johnson and Ryan Reynolds, and “Don’t Look Up,” with Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet and Meryl Streep.

Netflix shares have risen 1.6% so far this year, while the S&P 500 is broader
SPX,
-0.68%

increased by 10% by 2021.

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