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Gloomy Netflix forecast destroys most of the infections of the stock

This chart, taken on January 20, 2022, shows the Netflix logo on the TV remote controller. REUTERS / Dado Ruvic / Illustration

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LOS ANGELES, Jan. 20 (Reuters) – Netflix Inc. on Thursday shattered hopes of a quick recovery after sinking shares by nearly 20% and wiping out its remaining epidemic-fuel gains from 2020, after forecasting weak first-quarter subscriber growth.

The world’s largest streaming service is expected to add 2.5 million customers from January to March, less than half of what 5.9 million analysts predict, according to Refinitiv IBES data.

Netflix dampened its growth expectations, citing the late arrival of expected content such as “Bridgeton” and Ryan Reynolds’ time-travel film “The Adam Project”.

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Shares of Netflix fell nearly 20% to $ 408.13 in after-trade trading. Rival Walt Disney Co. (DIS.N), Risking its future in building a strong streaming business, with its shares falling 4%. Streaming Device Roku Inc (YEAR.O) Fell 5%.

Nasdaq Futures fell nearly 1%, with traders expecting the tech-heavy index to open lower on Friday.

Netflix added 8.3 million customers from October to December when it released star-studded new programs, including the new season of “Red Notice” and “Don’t Look Up” and “The Witcher”. Industry analysts estimate that at 8.4 million.

By the end of 2021, the company’s global subscriber base had reached 221.8 million.

In a letter to shareholders, Netflix said it hoped the ongoing COVID-19 epidemic and economic crisis in many parts of the world, such as Latin America, would bring subscribers’ growth back to pre-epidemic levels.

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Covid “created a lot of bump” which made it difficult to plan the number of subscribers, but “all the basics of the business are very solid,” co-CEO Ted Sarandos said in a post-revenue video interview.

The company recorded adjusted earnings per share of $ 1.33, crushing analyst consensus ratings of 82 cents. Revenues reached $ 7.71 billion, according to estimates.

Netflix last week Raised prices in its largest market, US and Canada, where analysts say growth is stagnating and are now expecting growth overseas.

The company rode on a roller coaster during epidemics, when people stayed home in early 2020, theaters closed, and in 2021 there was a recession. Netflix gained more than 36 million customers in 2020 and 18.2 million in 2021. .

Growth of Netflix subscribers in 2022 was expected to return to pre-epidemic record speeds when it added 27.9 million subscribers in 2019, analysts say. The company’s upcoming slate will include new installments of “Ozark” and “Stranger Things” and a three-part Kanye West documentary.

“Infectious locks have pushed tons of demand forward and it will take longer than expected to normalize,” said lead research researcher Jeff Vlodorsak.

Competitors including Disney and AT&T Inc (TN) HBO Max pours billions into new programming to gain a foothold in the streaming market.

Netflix said the competition could “affect our growth to some extent”, but said it was still growing in every country where new streaming options were launched.

“Even in a world of uncertainty and increasing competition, we are optimistic about our long – term growth opportunities around the streaming supplants linear entertainment world,” Netflix said in its partner letter.

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In their video interview, executives sought to reassure investors that Netflix’s long – term prospects are bright. Sarandos said the service did not see a decline in customer engagement or retention, and he predicted that switching from traditional television to streaming would open up opportunities worldwide. The shares fell nearly 20%.

“The pace of migration can be a bit difficult to call from time to time when there are very global events or even local conditions,” Sarandos said, “but it totally happens. There’s no question about that.”

The company is looking for new ways to attract customers, including mobile video games. Netflix has announced that it will release 10 games in 2021 and is pleased with the initial reception and will expand its gaming portfolio in 2022.

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Report by Lisa Richwin and Dan Similevsky in Los Angeles; Additional Reporting by Eva Mathews and Tiyashi Dutta in Bangalore and Noel Randevich in Oakland, California; Editing by Sriraj Kalluvila and Lisa Schumacher

Our standards: Thomson Reuters Trust Principles.