Netflix correction quarter: the streaming giant stumbles

Investopedia defines a “correction” as a “drop of 10% or more in the price of a security, asset or financial market”.

It was Netflix’s patch quarter.

Shares fell more than 10% after hours after Netflix said it added just under 4 million subscribers in the first quarter – missing the company’s 6 million forecast. Netflix also said it expects just 1 million paid net additions for the second quarter. To put that in perspective, Netflix added 10 million subscribers in the second quarter of last year.

Netflix enjoyed strong demand for its streaming service in the first six months of the pandemic, adding nearly 26 million subscribers in the first six months of 2020. The company did not see those gains coming. back then, and now she’s underestimating the hindsight as the pandemic seems to subside.

Still, it’s possible that long-term Netflix bulls will remain bullish. The company says it expects subscriber growth to resume in the second half of 2021, as a backlog of new shows and movies become available, delayed due to pandemic closures. In addition, the average revenue per user continues to increase in all regions of the world. The average user in the US and Canada now pays $ 14.25 per month for Netflix, up about 9% from a year ago.

Forecasting just 1 million new subscribers for the next quarter may be a deliberately conservative direction as Netflix, along with the rest of the world, readjustes to post-pandemic life.

International growth and APRU earnings will likely be what pushes Netflix stocks even higher if the company can deliver.

This quarter brought the Netflix pandemic wave back to earth. If the theme for the second half of the year is a throwback, that’s probably good news for Netflix. Reality has been kind enough to co-CEO Reed Hastings’ company.

WATCH: CNBC’s Alex Sherman and NYT Ed Lee discuss Netflix profits