Netflix shares plunge as subscriber numbers miss expectations by a mile after COVID-19 ‘pull forward’
Shares of Netflix dropped as much as 11% Tuesday, in late trading, after the company reported Q1 revenue and profit that topped analysts' expectations, but missed its own target for subscribers by a wide margin, and said subscriber growth will remain under pressure this quarter, as the company awaits new content later this year.
"We finished Q1'21 with 208m paid memberships, up 14% year over year, but below our guidance forecast of 210m paid memberships," Netflix management said in a press release. "We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays."
Netflix added 3.98 million global paid streaming subscribers, on a net basis, well below the company's forecast for 6 million, and Wall Street's expectation for 8.7 million.
The company added that "We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup.
"In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment."
Revenue in the three months ended in March rose 24%, year over year, to $7.16 billion, yielding EPS of $3.75.
Analysts had been modeling $7.13 billion and $2.94 per share.
For the current quarter, the company sees revenue of $7.3 billion, and EPS of $3.16. That compares to consensus for $7.37 billion and a $2.67 per share.
The company is forecasting adding just 1 million paid subscribers this quarter, which would be down from 10 million in the year-prior Q2, and well below Wall Street's average estimate for 4.2 million addictions.