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Netflix stock’s latest drop leaves investors in shock

Updated: Jan 24, 2022

Netflix stock took a deep dive on Friday, plummeting nearly 22% after the company missed its own forecast of paid subscribers’ addition for the fourth quarter.

Moreover, the video streaming giant indirectly referred to increased competition for affecting its growth.

The latest decline was its steepest one-day drop in nearly a decade, wiping off nearly $49 billion in market capitalization. Netflix’s market value plunged to nearly $176 billion on Friday from roughly $225 billion on Thursday, leaving investors in shock.

Nevertheless, Netflix managed to beat profit and sales expectations for the fourth quarter.


Q4 Highlights

Netflix Inc. reported a profit of $1.33 per share for the three months ended December 31, 2021.

In comparison, the company had posted earnings of $1.19 per share for the comparable period of 2020. The weak year-over-year increase in Q4 profit was mainly attributed to elevated costs as a result of unique content production. Yet, it was enough to easily surpass analysts’ average estimate of 83 cents per share.

In addition, total sales for the quarter jumped 16 percent versus last year to $7.71 billion, almost in line with the consensus estimate.

On the downside, Netflix added 8.3 million new subscribers during the quarter, missing its own projection of 8.5 million. Netflix’s total subscribers reached 221.8 million following the latest additions.


Weak Outlook

Netflix expects to add 2.5 million new subscribers in the current quarter, compared to 4 million net additions in the first quarter of 2021, and significantly lower than analysts’ average estimate of 6.93 million.

Several research firms downgraded Netflix following the latest earnings reports. For instance, KeyBanc Capital lowered its rating for the stock to “Sector Weight” from “Overweight,” while Piper Sandler slashed its price target for Netflix to $562 per share from $705 per share.

See below the updated fundamental data of Netflix:

You can learn more about earnings reports in the video below:



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