Rege-Jean Page and Phoebe Dynevor star in Netflix’s ‘Bridgerton.’
Netflix
Investopedia defines a “correction” as a “fall of 10% or more in the price of a security, asset or financial market.”
This was Netflix’s correction quarter.
Shares fell more than 10% after hours after Netflix announced it had added just under 4 million subscribers in the first quarter, falling short of the company’s forecast of 6 million. Netflix also said it expects just 1 million paid net additions for the second quarter. To put that in perspective, Netflix added 10 million subscribers in the second quarter of last year.
Netflix benefited from strong demand for its streaming service in the first six months of the pandemic, with nearly 26 million subscribers in the first six months of 2020. The company didn’t see those gains coming at the time, and now it underestimates the downturn as the pandemic appears. to confiscate.
Still, there is room for long-term Netflix bulls to remain optimistic. The company says it expects subscriber growth to accelerate again in the second half of 2021 as a backlog of new shows and movies become available that were delayed amid pandemic shutdowns. Furthermore, the average revenue per user continues to increase in all regions of the world. The average user in the US and Canada now pays $ 14.25 a month for Netflix, about 9% more than a year ago.
Predicting just 1 million new subscribers for the next quarter may be a deliberately conservative guideline as Netflix, along with the rest of the world, is adjusting to life after a pandemic.
International growth and APRU earnings are likely to drive Netflix’s stock even higher if the company can perform.
This quarter brought the Netflix pandemic back to Earth. If the theme of the second half of the year is a return to reality, that’s probably good news for Netflix. Reality has been really nice for co-CEO Reed Hastings’ company.
WATCH: CNBC’s Alex Sherman and NYT’s Ed Lee discuss Netflix’s earnings