Future weak streaming subscriber growth expectations pushed Netflix investors to pummel the streaming platform's stock price a massive 20% in after-market trading.
Alarm bells rang out when the company disclosed in its shareholder letter that future global first-quarter 2022 subscribers would only be up 2.5 million, which could signal a slowdown.
Netflix admitted -- perhaps more strongly that in past releases -- that competition was having some effect.
“[Competition] has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” says Netflix. It adds that “competition may be affecting our marginal growth some.”
Also helping to sink the stock is that the 2.5 million subscriber first-quarter projection means dramatically slower pacing for the year overall. Wall Street analysts had expected 24 million global subscribers for each of the next two years, resulting in an estimated positive cash flow of around $10 billion.
Still, long term, Jeff Wlodarczak, media analyst of Pivotal Research Group, is positive regarding the company: "Our basic thesis remains unchanged. Netflix continues to have a five-plus year head start on its peers with a broad focus across most demographics. [It] is poised to continue to be the dominant player globally in a move to streaming -- which in our view is in the middle innings -- away from traditional pay TV. We believe there are still significant global subscriber/ARPU growth opportunities."
For the just-completed fourth-quarter period, Netflix posted $569 million negative free cash flow. Netflix added 8.3 million in the period, slightly under expectations (8.5 million). Of that global total, the U.S. and Canada added 1.2 million.
Quarterly revenues for Netflix were up 16% to $7.7 billion; they were also 19% higher to $30 billion for the year overall. Fourth-quarter net income grew 12% to $607 million. For all of 2021, operating income was up 35% year-over-year to $6.2 billion. Global subscribers stood at 221.8 million, up 9% from a year ago.
Recently, Netflix said it would be raising prices $1 to $2 for its basic, standard and premium plans to $9.99, $15.49 and $19.99, respectively.