▶️ Can Netflix Get Over Friday’s Drubbing?

Activist investor wants Peloton to fire CEO.

Hey Global Investor! Here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Friday’s Close) 4,397.94 -84.79 (1.89%)

NASDAQ (Friday’s Close) 13,768.92 -385.10 (2.72%)

FTSE 100 (4:30 PM IST) 7,391.66 -102.47 (1.37%)

NIFTY 50 (Today’s Close) 17,149.10 -468.05 (2.66%)

USDINR (4:45 PM IST) 74.59 (1 Year +2.18%)

🔥 Top Movers

CFV +31.31%
PTON +11.73%
ITCI +9.75%

NFLX -21.79%
MSTR -17.84%
SPWR -16.96%

▶️ Netflix: Friday The 21st?

There hasn’t been this bad a day for Netflix (NFLX) since July 2012. The company managed to surpass estimates on most fronts in Q4. But the stock market isn’t about the past but the future. And the investors didn’t like what they saw in the crystal ball. That was enough for them to beat a retreat! (Tweet This)

Crown Under Threat?

“My Crown is called content, a crown that seldom kings enjoy.” – Shakespeare.

Netflix has been the undisputed king of streaming content for quite some time.  The pandemic was a shot in the arm as its subscription numbers hit the stratosphere. People, confined to the four walls of their homes, found solace in Netflix and its content pipeline. The result? It added a record 36M subscribers worldwide in 2020 alone.

This past quarter, Netflix released more titles than in any other quarter. Ever. New seasons of popular shows such as “The Witcher” and “Money Heist.” New shows such as “Maid.” Movies such as “Red Notice” and “Don’t Look Up” clocked 364M hours and 350M hours respectively within the first 28 days of release, becoming the most-watched Netflix movies ever.

The result? Satiated subscribers who remained glued to Netflix content kept the cash register ringing.

Key Highlights From Q4:

  • Revenue: $7.71B Vs $7.71B estimated
  • EPS: $1.31 Vs $0.82 estimated
  • Net Subscriber Additions: 8.28M Vs 8.19M expected

The issue was the 8.28M subscribers that were added in Q4. It was lower than the 8.5M it added at the same time last year. It also didn’t meet its own internal projection of 8.5M subscribers for Q4.

Competing With Sleep Or Hubris?

And it went downhill from there. For Q1 2022, Netflix expects to add 2.5M subscribers, dramatically lower than the 3.98M it added in the year-ago quarter. Analysts were expecting 6.93M additional subscribers. The company added around 18M subscribers for the full year, half the number it had achieved during the pandemic and its slowest growth since 2015.

Back when CEO Reed Hastings could barely put a wrong foot, he had mentioned sleep as Netflix’s biggest competitor. Today, the company acknowledges players such as Disney, HBO Max, and Amazon Prime are affecting its growth. Today Netflix has a total of 221M subscribers, with Disney coming a distant second at 179M subscribers (that was Disney’s count as of Q3 2021).

The fact is Netflix is fast reaching stagnation in its largest markets, the US and Canada. While the company added 7.14M customers in the Asia Pacific and 7.34M in Europe, Middle East, and Africa (EMEA) geographies in 2021, it managed to add only 1.28M in the US and Canada subscribers for the full year.

Netflix also raised prices in the US and Canada, with the premium plan now costing $19.99. On the other hand, it slashed prices in India to INR 199 (from the earlier fee of INR 499), where it is trying to establish its dominance. Whether subscribers in a stagnating market such as the US will embrace these price increases is anybody’s guess.

Netflix had announced a foray into video games last year. But that still will take some time to materialize. In the meantime, its future competitors in the Metaverse are already taking giant strides. Microsoft’s acquisition of Activision and Take-Two’s takedown of Zynga is a case in point.

“Getting to the top is not so easy; staying there is more difficult.” – Husnu Ozyegin.

Netflix’s once unassailable position as the “Eternal Monarch” of streaming services is now under threat. Slowing subscriber growth, subdued guidance, a stagnating core market, and analysts cutting down on estimates – a lot is going on.

The worst week since 2012 has eroded $56.8B in market value for Netflix. But, for now, investors may need to take the “Don’t Look Up” title a little seriously and can only hope “Cobra Kai” comes to its rescue!

Market Reaction
NFLX ended at $397.50, down 21.79%.

Company Snapshot 📈

NFLX $397.50 -110.75 (21.79%)

Analyst Ratings (47 Analysts) BUY 70%  HOLD 21%  SELL 9%

Newsworthy 📰

Suggestion: Activist investor Blackwells Capital pushes Peloton to fire CEO (PTON +11.73%)

Suitors: Kohl’s under fresh pressure as Sycamore expresses interest after Acacia made bid (KSS -2.60%)

Launch: GM announces new high-performance Cadillac Escalade V-Series SUV (GM -2.51%)

Later Today 🕒

  • IBM Corp. Earnings (IBM)
  • Halliburton Co. Earnings (HAL)
  • Koninklijke Philips NV Earnings (PHG)
  • Brown & Brown Inc. Earnings (BRO)
  • Steel Dynamics Inc. Earnings (STLD)
  • Crane Co. Earnings (CR)
  • 8:15 PM IST: Markit Manufacturing & Services PMI Flash

Today’s Market Terminology: Vanilla Issue

A Vanilla Issue is generally the issuance of a security that has no unusual features

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