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Netflix experienced a subscription slowdown even in places where there is less competition.
Netflix Inc (NASDAQ: NFLX) stock fell as much as 8.68% in the after-hours trading session after the company reported a large miss in paid subscribers during the first three months. During Q1, Netflix recorded revenue of $7.16 billion, versus $7.13 billion expected by analysts according to a survey conducted by Refinitiv.
Additionally, the streaming service provider recorded earnings per share of $3.75, versus $2.97 EPS expected by analysts according to Refinitiv. However, Netflix investors were quick to notice that the company did not meet its subscriber target. During the first three months, Netflix said that the global paid net subscriber was 3.98 million while analysts expected 6.2 million according to a survey by FactSet.
Netflix Business in Q1
The low turnout can be attributed to the COVID vaccine rollout that has facilitated the reopening of global economies. Furthermore, a significant number of people have returned to their work and those staying at home are working remotely, thus reducing the paid subscribers.
“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 said in its letter to shareholders.
Reportedly, Netflix recorded a total of 15.8 million paid subscribers during Q1 of 2020, after the coronavirus was declared a global pandemic.
The company experienced a subscription slowdown even in places where there is less competition, which is a show of low demand. New customers totaled 1.8 million in Europe, 1.36 million in Asia, and 360,000 in Latin America. “What wasn’t expected was the strength of the slowdown in international markets, where competition is significantly lower,” said eMarketer analyst Eric Haggstrom.
The company continues to face fierce competition from other online streaming providers including HBO Max, Apple TV, Disney+, Amazon Prime, and Hulu. However, Netflix anticipated releasing more shows in the coming months, a move that could attract more paid subscribers.
The company noted that the competition was not intensive as the results were broadly covered. “We don’t believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions,” the company noted in the earnings report.
Forward, the company expects its business to pick up should the Covid vaccine development and rollout slow down due to approval processes. “As we’ve noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second-half weighted with a large number of returning franchises,” the company said.