Global video streaming giant Netflix has exploded.
On April 20, local time, Netflix’s US stock fell by more than 35% after the opening. Its latest financial report showed that Netflix’s revenue in the first quarter of 2022 was US$7.87 billion, a year-on-year increase of 9.8%. Compared to the previous quarter, Netflix's revenue growth continued to slow.
What is more worrying to the outside world is the number of users. In 2022, Netflix will experience the loss of paid users for the first time, and the number of paid users worldwide will lose 200,000. Even if the impact of withdrawing from the Russian market is excluded, the number of new paid users is far lower than the company's previous The expected 2.5 million.
As of the close of U.S. stocks, Netflix closed at $226.19 per share, down 35.12%, with a total market value of $100.4 billion, evaporating more than $54 billion, and the stock price has fallen more than 60% this year.
First-quarter results exploded
First-quarter results exploded
According to financial report data, Netflix’s revenue in the first quarter of 2022 was US$7.868 billion, an increase of 9.8% from US$7.163 billion in the same period last year; operating profit was US$1.972 billion, an increase of 0.6% from US$1.96 billion in the same period last year; operating profit The ratio was 25.1%, down 2.3% from the previous year; the net profit was US$1.597 billion, down 6.4% over the same period of the previous year; the diluted earnings per share was US$3.53, down 5.9% year-on-year.
In addition, according to data released by Netflix, the number of global subscribers in the first quarter of this year was 221.64 million, a year-on-year increase of 6.7%, but a month-on-month decrease of 200,000, the first decline in history.
Netflix management pointed to four main reasons for the decline in subscribers: the growth rate of subscribers in households with broadband networks is partly determined by factors beyond its control; in the past three years, streaming media Competition in the industry has intensified; macro factors, including slowing economic growth, rising inflation, and the Russian-Ukrainian military conflict, as well as account sharing issues.
Still, Netflix remains far ahead of most of its rivals outside the U.S. and is the world's largest streaming service.
The company believes it can get out of its current woes by attracting new customers with better programming and finding more ways to charge its existing subscriber base.
The company still expects to add customers this year and more new shows in the second half of the year.
The Wall Street Journal pointed out that in the early days of the new crown epidemic, as lockdowns and measures to curb the spread of the virus kept people at home, Netflix users surged, pushing the company's stock price to a record high.
And over the past year, Netflix's growth has been hampered by the relaxation of epidemic prevention measures and increased competition from other streaming services.
Wall Street retreat
Wall Street retreat
Netflix stock has been a Wall Street darling in recent years, with Facebook, Amazon and Google parent Alphabet known as the FANG stocks, seen as the backbone of U.S. tech stocks.
This time around, however, Wall Street analysts are slashing their price targets for the streaming video company, with at least nine brokerages downgrading the stock, according to Bloomberg.
JPMorgan analyst Doug Anmuth downgraded Netflix to "neutral" from "overweight" with a $300 price target.
He said he was encouraged by the company's intention to create an advertising business, a model that has worked for both Disney-owned Hulu and Disney+, but noted that it was still in the early stages.
Hedge funds are also starting to leave.
On the evening of April 20, local time, Bill Ackman, a hedge fund boss and founder and CEO of Pershing Square Asset Management, said that he had already cleared Netflix.
In less than four months, Ackman lost about $430 million on his Netflix investment, Bloomberg reported.
In a letter to shareholders released by Pershing Square Asset Management, Ackman said: "This investment loss reduces our year-to-date returns by 4%. As of today's close, our fund is down about 2% year-to-date. "
In addition, the company said that while Netflix's business is fundamentally easy to understand, it has lost confidence in its ability to predict the company's future prospects with sufficient certainty given recent events.
"Yesterday, in response to continued disappointing customer subscription growth, Netflix announced it would revise its subscription-only model to more aggressively engage non-paying customers and incorporate advertising, an approach management estimates will take one to one Two years to implement. While we believe these business model changes are sensible, it is difficult to predict their impact on the company's long-term user growth, future revenue, operating margins and capital intensity," Ackman said.
At the end of January this year, Ackman revealed on Twitter that his company bought more than 3 million Netflix shares, becoming one of Netflix's top 20 shareholders.
Netflix stock was trading around $360 at the time, and Ackman's position was worth more than $1.1 billion at the time.
"We believe Netflix is a key beneficiary of long-term growth in streaming, a high-quality business overseen by a world-class management team. While we expect some near-term changes in the company's quarterly growth and profitability, We are confident in Netflix's long-term prospects. We estimate that the company can achieve double-digit annual revenue growth over the next ten years." Ackman used to be confident in Netflix.
In his April 20 shareholder letter, however, Ackman said he had learned from past mistakes to exit bad bets early.
He said he would redeploy the funds from the Netflix sale to other opportunities.
water test ads
water test ads
Netflix, which has historically refused to place ads on its streaming service, had to change its tune after a massive loss of paying subscribers in the first quarter.
Netflix said it is exploring a lower-priced ad-supported version of the platform to expand its user base.
“I really like the simplicity of the subscription user. While I’m all for that, I’m more supportive of consumer choice, allowing both those who want a lower subscription price and those who have zero tolerance for ads to get theirs. It needs to be right." At an analyst meeting after Netflix released its earnings report, Netflix co-founder and CEO Reed Hastings said that the company will discuss whether to open this channel in the next year or two, but " We are open to 'ad accounts' offering lower subscription fees."
Speaking of Netflix's performance, Hastings said, "What we're going to do is take it up a notch" to "win back investors' hearts."
Hulu generated $3 billion in advertising last year, with about 88% of subscribers opting for the ad-supported plan, noted Michael Morris, an analyst at Guggenheim Partners.
He estimates that commercials could contribute $4 billion in profits to Netflix by 2030.
According to the Wall Street Journal, users are more sensitive to subscription fees as more and more streaming platforms are available.
Netflix is one of the few major streaming platforms that has yet to consider offering a low-cost ad-supported plan.
Streaming platform Hulu has long offered this low-cost plan, while HBO Max and Disney+ are already pushing advertising plans.Keywords: