End Of the Movie For Netflix
25 January 2022
The stock drops 22% on the announcement of Q4 results.nd trimestre.
"Netflix disappoints in terms of new subscribers, raising doubts about its ability to grow." This is what we could read on Friday, on the front page of Barron's, a weekly newspaper very followed in the financial community in the United States.
And for good reason, the company has attracted half as many new subscribers as the previous year. More worryingly, the streaming giant expects just under 3 million in Q1 2022. That's 4 times less than in Q1 2019, before the pandemic. Yet the company has spent heavily on content production: $18 billion this year.
We follow Netflix very closely. And as you know, we were not very optimistic about the stock. Last October, we hosted a webinar during which we explained in 2 key points why the stock was largely overvalued:
- First point: a coming slowdown of growth in developed countries, i.e. those that are profitable for Netflix.
- Second point: major difficulties in generating margin, as subscriber retention requires massive and ongoing investment in content.
These two points are still relevant, and are materializing: at the end of October, Netflix weighed nearly $300 billion on the stock market. Today, the company is worth $170 billion. A loss of nearly 45% for some investors, which can still get worse.
170 billion dollars is still very expensive for a company that has to invest more than it earns to protect its revenue..
Have a great week,
Pierre
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