The easing of pandemic lockdowns is taking a far more severe toll on Netflix Inc.’s growth than anticipated, sending its shares plunging as much as 13% on Tuesday.
The streaming service added just 3.98 million subscribers in the first quarter, missing Wall Street’s estimate of 6.29 million and its own forecast of 6 million. The current quarter will be even more challenging, with Netflix predicting 1 million new customers — a fraction of the 4.44 million projected by analysts.
Netflix has been warning for months that growth would slow after customers emerged from Covid hibernation, but few expected it to stall so dramatically. The first quarter of 2020 had been the strongest in company history, with 15.8 million new customers, and Netflix’s pace was still surprisingly brisk in the fourth quarter.
The latest three months, in contrast, marked the slowest first quarter since 2013, when Netflix added about 3 million customers.
A lack of new shows also may be contributing to the slump. The company’s output slowed in the first quarter due to fallout from the pandemic, which led to production delays. Netflix was able to sustain its release schedule for the first several months of Covid lockdowns because it had already finished many shows. But movies and programs that were supposed to be in production last March, April and May had to stop, leading to the current shortfall.
All of that coincided with a stiffening of competition in streaming, from Disney+, HBO Max and Apple TV+ to newer entrants like Discovery+ and Paramount+. Some are less expensive than Netflix, which raised its U.S. prices in October.
Europe continues to be a bright spot for Netflix. The streaming service added 1.81 million customers across Europe, the Middle East and Africa, leading the company. “Lupin,” a French heist thriller, was the service’s most popular new series in the quarter.
Netflix fell as low as $480 in extended trading, which would be a 2021 low. The stock had risen 1.6% this year through the close Tuesday in New York.