Netflix shares have nose-dived in the past five days...and here's why.
As of today, Tuesday January 25, Netflix shares dropped a new yearly low of $366.42 USD. This follows days of sharp drops and slow climbs that create erosion in the company's projected EPS.
Netflix's most recently Q4 report is the root cause of the dives. Despite announcing 221.8 million paid subscribers and a thunderous $29.7 billion in revenues and $5.1 billion in net income, the company disappointed investors in a number of key ways.
- Netflix missed its new subscriber target - Execs wanted subs to grow to 222.06 million, but missed the mark by ~200,000 consumers. That's about $2 million in revenue assuming a $9.99 base plan.
- Massive operating profit hit - Op. profit was down -83% to $392 million as Netflix spends more on securing and retaining content.
- Financing loss - Netflix reported a $1 billion loss in cash from financing as it re-payed $500 million in debt, bought $600 million in share repurchases, and paid $224 million to secure tax payments for equity awards.
- Lower cash position - The streamer's cash was reduced by $1 billion in 2021, totaling to $6 billion. Netflix had a cash position of $8 billion in 2020.
- Low subscriber growth target - Execs expect to add 2.5 million subscribers in Q1 2022. Netflix subscribers grew by 3.97 million in Q1 2021, and an astronomical 15.76 million in Q1 2020.
These are the main reasons behind Netflix's share slide.
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