Netflix, just weeks after telling the world that it would add about 2.5 million new subscribers in Q1 -- guidance that sent its stock down more than 25% in January -- is on a pace to nearly double that mark, according to Barclays Global media analyst Kannan Venkateshwar.
Netflix watched its stock tank in January after reporting disappointing Q4 results and issuing guidance for Q1 subscriber additions that were well below past performance. Adding to the concern was that Netflix traditionally adds a large portion of its full-year customers in Q1, so the falloff was seen as a signal that slower growth would at least be a year-long phenomenon.
Netflix stock fell from $508.25 per share to $397.50 on January 21, and the shares have been on a roller coaster ride ever since, rebounding to $457.13 each on February 1 after a hedge fund and founder and co-CEO Reed Hastings purchased large blocks of shares. But that boost turned out to be temporary, as the stock was priced at $367.46 in early trading Thursday.
In a research report March 3, Venkateshwar wrote that after analyzing data from several different sources -- including app downloads, Daily Active Users (DAUs), Monthly Active Users (MAUs) and credit card data -- the short-term picture could be brighter.
In his note, Venkateshwar acknowledged that no single data source was accurate enough to use as a single basis for quarterly trends, but taking the average came closest to mimicking actual performance.
“Based on this method, Netflix appears to be trending at ~4 million subs in Q1, better than company guidance,” Venkateshwar wrote. “Performance in line with this could be a bit of relief relative to [the] company’s low guide of 2.5 million, but would still imply full year performance of 16 million, lower than present consensus estimates of ~18 million (Barclays at 14 million).”
January engagement growth was better than February, as DAUs and downloads slowed in many countries. But the Asia-Pacific region was quite strong, which gave the analyst some hope that Q1 will be better than expected.
And though Netflix's release slate was weaker during the first two months of the year, in March it appears to be picking up, largely on the back of a greater number of movie titles than in the prior year, the analyst wrote.
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At the same time, Venkateshwar noted that rival streaming services like HBO Max and Peacock are showing added signs of strength, while Disney Plus remains volatile.
The analyst wrote that while Disney Plus downloads and MAU numbers were up sequentially in January, they showed some weakness in February. Engagement growth at its Star Plus content hub, which launched in February 2021 in Canada, Western Europe and parts of Asia, also appeared to slow sequentially, he wrote.
According to Venkateshwar, HBO Max downloads in December by 2% over the previous month, with January up 13% and February rising14%. At Peacock, December downloads were down 11% compared to the prior month, rising 6% in January and 86% in February. At Disney Plus, excluding its Hotstar service in India, month-over-month downloads were up 1% in December, 20% in January and down 27% in February.
The analysts attributed HBO Max’s performance to a string of strong original releases like Euphoria, The Gilded Age and Station Eleven, while Peacock’s growth was likely driven by the Olympics.
