Netflix misses the goal of the extra pass, shares the drop

Veteran for streaming videos Netflix 09.30 NASDAQ: NFLX reported first-quarter results immediately after the closing bell on Tuesday, April 20th. The report did not meet several important targets, and guidelines for the next quarter were modest. Shares of Netflix fell as much as 11.8% in after-hours trading, dropping to a level not seen since March 25th.

Netflix added 4 million new subscribers during the first quarter, adding up to 207.6 million global paid memberships. Management guidelines proposed 6 million net supplements. Revenue rose 24% year-over-year to $ 7.16 billion, and earnings jumped from $ 1.57 to $ 3.75 per diluted share. The top score was roughly in line with the guidelines and earnings exceeded the stated target of $ 2.97 per share.

A chart showing additions of Netflix subscribers from week to week in the last 4 years with guidelines for the next quarter.

Image source: Netflix.

Looking at the second quarter, Netflix management expects earnings to double, while revenue will increase by approximately 19%, to about $ 7.3 billion. Subscriber add-ons are slowing down to a million names.

“In terms of performance in the first quarter, it honestly comes down to COVID,” CFO Spence Neumann said in a call for earnings. “COVID’s extraordinary events continue to have a major impact on the world and for us, to say the least, create short-term happiness in some of the business trends we see.”

In particular, the health crisis generated more than 40 million new subscribers in 2020, while at the same time dramatically slowing down the pace of content production. Mild customer additions in the first quarter followed in response to this combination of factors. Many of the title launches and premieres of the new season that were scheduled for the first half of 2021 have been moved to the second half of the year, which will again distort the seasonal business rhythm. Neumann pointed out that the annual growth rate of subscribers is about 20% in the last two years, mitigating the extraordinary growth from the beginning of 2020 and the slower pace that followed. This is in line with the average growth of customers in the company in the last few years.

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