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Netflix Subscriber Growth Slumps As The Pandemic’s Effects Subside

Netflix (NASDAQ:NFLX) saw a significant slide in its share price over the past two days after the company announced weak Q1 subscriber growth, primarily driven by the easing of restrictions as inoculation rates increase and the delays experienced in the releases of shows on the platform. Shares slid nearly 8% on Wednesday.

The streaming service saw an addition of only 4 million subscribers during Q1, well below the 6.25 million benchmark analysts had expected. The company also projected much slower growth for Q2, expecting only 1 million net additions, compared to analyst estimates of 4.8 million.

Though the company's financials remained strong as net income was $1B higher than the same quarter in 2020, this profitability boost was mainly generated by the delays in productions leading to a slower growth in expenses, helping margins grow but hurting membership growth.

Netflix's performance raises concern over similar equities that experienced strong performance due to the COVID-19 pandemic. More investors are now asking whether the pandemic will fuel consistent growth for companies that benefited, or if it simply pulled forward 2-3 years of demand, creating inflated short term performance that will drop off significantly moving forward.

Netflix's competitors also represent a growing threat, as Hulu, Disney+, HBO Max, and Amazon Prime Video all gain users, potentially pulling money and viewing time from Netflix.


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