Netflix stock plunges nearly 20 per cent amid subscriber growth worries

Investors are worried Netflix may have be nearing its peak in popularity

Netflix’s first-quarter results were announced on Thursday (Copyright 2018 The Associated Press. All rights reserved.)

Netflix’s stock price plunged over 19 per cent after the streaming service reported weak first-quarter subscriber growth.

The California-based entertainment company announced it had added 8.3 million worldwide subscribers during the October-December period in 2021, or around 200,000 fewer than management had forecast.

While acknowledging the competition is having “marginal” effects on its growth in its quarterly shareholder letter, Netflix emphasised its service is still thriving in every country where it’s available.

Besides releasing its fourth-quarter results on Thursday (20 January), Netflix also projected an increase of 2.5 million subscribers during the first three months of this year – well below analysts' expectations for a gain of 4 million, according to FactSet Research.

Consequently, Netflix's stock price plunged by more than 19 per cent in extended trading, deepening a steep decline during the past two months.

It capped a challenging year for Netflix after it reported eye-popping gains during the pandemic lockdowns of 2020 that drove homebound people to its service.

Investors concerns that Netflix may be nearing its peak in popularity have pushed the stock price down by more than 30 per cent from its peak of roughly $700 reached in mid-November 2021.

In 2021, Netflix reported its slowest pace of annual subscriber growth in five years. (ALASTAIR PIKE/AFP/Getty Images)

Netflix picked up 18.2 million worldwide subscribers during 2021, its slowest pace of annual growth in five years. This came after Netflix gained more than 36 million subscribers during 2020.

The service now boasts nearly 222 million worldwide subscribers worldwide – more than other video streaming leader – but other services backed by deep-pocketed rivals such as Walt Disney Co and Apple have been making inroads in recent years.

Amid escalated competition, with a bevy of other networks also moving towards video streaming, Netflix announced its decision to expand into video games in 2021.

Last week, Netflix raised its price by roughly 10 per cent within the US and Canada – a move that could cause some subscribers to cancel the service, based on the company’s past history with price hikes.

Additional reporting by Associated Press