Netflix (NFLX) 2021 Q1 Financial Performance Review

Netflix Inc. (NASDAQ:NFLX), founded in 1997, is a video streaming giant based in Scotts Valley, California. With the aggressive international expansion in recent years, it has evolved into the biggest subscription streaming service in the world. Netflix went public in May 2002 by selling 5.5 million shares at $15. It has come a long way since then, overcoming many challenges in its decades-long journey.

The California-based company enjoyed exceptional growth last year as millions of people turned to its streaming service during the lock-down restrictions following the Covid-19 outbreak. Overall, Netflix added a record 37 million paid subscribers in 2020, while its share price jumped nearly 70 percent.

However, Netflix is struggling to maintain its growth pace this year. The company recently reported weak financial results for the first quarter amid a deceleration in subscriber’s growth. It reported earnings of $3.75 per share for the March quarter, beating analysts’ average estimate of $2.97 per share. Revenue jumped 24 percent on a year-over-year basis to $7.16 billion, just above analysts’ average estimate of $7.1 billion.

However, the addition of 4 million subscribers in the March quarter was well below analysts’ average estimate of 6.25 million. Moreover, Netflix expects to add just one million new subscribers in the June quarter, significantly lower than its previous projection of 4.8 million.

Addressing shareholders in a letter, Netflix said, “We finished Q1’21 with 208m paid memberships, up 14% year over year, but below our guidance forecast of 210m paid memberships. We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays. We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup. In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment.”

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