More and more mainstream players entering the OTT space might actually accelerate OTT adoption. However, there is a counterargument as well. First, with competition increasing, it is natural to expect that the extremely high subscriber growth which Netflix has seen over the recent years might slow down. The future course of Netflix’s stock will be decided by how its subscriber growth is trending and whether the launch of new competing services like Disney Plus ( DIS) will pose any threat to its leadership position. Management was also not able to give clear reasoning behind low subscriber addition guidance for Q1 on its earnings call which further added to the investor anxiety resulting in a sharp drop. However, when the company came out with a just 2.5 mn subscriber addition guidance for Q1 2022, it surprised many investors. Usually, Q1 is a strong quarter in terms of subscriber addition and after somewhat modest FY2021 investors were expecting subscriber growth to return to normal in FY2022. However, the most troubling part was subscriber addition guidance for Q1 2022. While the company’s Q4 revenues of $7.71 bn was in line with the sell-side estimates and GAAP EPS of $1.33 beat estimates by $0.50, its subscriber addition of ~8.3 mn in Q4 missed the guidance of ~8.5 mn. Netflix’s Q4 earnings release served as a catalyst for the sharp correction its stock saw last month. While the stock has shown some recovery from the bottom as renowned fund manager Bill Ackman took a stake and the company’s co-CEO Reed Hastings also bought its shares, it is still significantly below the levels it was trading at prior to its Q4 2021 earnings. Netflix’s ( NASDAQ: NFLX) stock has corrected sharply post-earnings as investors panicked over the disappointing subscriber addition guidance. Mphillips007/iStock Unreleased via Getty Images
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