The short: Your favourite streaming service, Netflix, suffered a significant 20% stock dip last week. Investors are concerned about its inability to meet the projected target of new subscribers post-pandemic.
By the numbers: Netflix reported 221.84 million subscriptions in 2021, compared to its target of 222.06 million paid subscriptions. The company added 18 million subscribers in 2021 compared to the 37 million subscribers in 2020 – no thanks to the family and friends sharing your account.
Deep Dive: Netflix has been unable to keep up with its growth targets. The company experienced a stall in growth in its core US and Canadian market. At some point, it lost 400,000 subscribers in 2022.
A lot of Netflix’s growth has come from international markets, where it provides its services at a significant discount. Still, Netflix dominates the market through its aggressive spending and investment in content production and acquisitions. However, the company’s revenue can’t catch up, leading to frequent price hikes to existing customers.
For example, Netflix’s standard plan at $15.49 is almost double
its rivals, and it’s hiked up prices three times in three years. As a result, concerns are mounting over the company’s ability, a huge beneficiary of the pandemic lockdowns, to retain customers with the world opening back up.
The good stuff: Netflix can pat itself on the back as it achieved a significant milestone in international markets – the company attained a record quarterly revenue that exceeded $2.5bn for the first time in the EMEA region!
Final Thoughts: The 20% dip in Netflix’s value is a classic market overreaction. Netflix is a verb and is going nowhere for now. Netflix recently signalled interest in making a strong gaming play (building a gaming unit from scratch), and its international expansion could potentially pay off in the long term.
In the meantime, the company would have to figure out how to keep investors convinced of its progress and earn their patience.
Good luck to them.
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