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Netflix share price loses over 25% after losing 200,000 subscribers in Q1 2022

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The share price of Netflix, one of the world’s leading subscription streaming service and production company, is down 25.73% in pre-market skirmish after the company released its first Quarter 2022 report, which revealed that the firm lost approximately 200,000 subscribers in the quarter when it was projected to 2.5 million subscribers.

This is the first time Netflix is recording a decline in the number of subscribers in over 10 years. The company blamed the decline on stiffer competition, the inability to expand in some territories due to technological limitations and account sharing. It also blamed inflation and the war in Ukraine as part of the reasons for the loss of its subscribers.

In a letter to its shareholders, the firm stated, “However, our relatively high household penetration – when including the large number of households sharing accounts, combined with competition, is creating revenue growth headwinds.”

What you should know

  • Netflix explained that it expects to lose another 2 million subscribers in the second quarter of 2022. It further explained that the loss in subscribers meant that 222 million households are paying for Netflix, but over 100 million more are sharing those accounts, who are not paying for its services.
  • To help boost its subscriber count, the firm is considering offering cheaper ad-supported plans in the coming years. In the company’s most recent earnings call, co-CEO Reed Hastings revealed that the streaming giant is currently working on the offering and that it will be finalizing details for those plans “over the next year or two.”
  • Hastings also said he finds ads complex and he’s a huge fan of the simplicity of subscriptions but giving consumers who don’t mind watching ads the option to pay less “makes a lot of sense.”
  • Despite decline in subscribers, Netflix’s first-quarter revenue grew approximately 10% to $7.87 billion compared to the first quarter of 2021 where it generated $7.16 billion and added 3.98 million paid subscribers.
  • The firm also reported per-share net earnings of $3.53, beating Wall Street’s consensus of $2.89, according to Refinitiv survey of analysts.
  • The company explained that the suspension of its service in Russia and the winding-down of all Russian paid memberships resulted in a loss of 700,000 subscribers.
  • It also mentioned that excluding that impact, it would have seen 500,000 net additions during the most recent quarter.
  • Despite increase in revenue, the firm’s net income declined against Q1 2021 by 6.44%, from $1.71 billion in Q1 2021 to $1.59 billion in Q2 2022. This was majorly attributable to a decline in interest and other income by 27.29%

According to the outlook portion of the letter to investors, Netflix stated, “Our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix – in particular the quality of our programming and recommendations, which is what our members value most.”

Year-to-Date (YtD), Netflix’s share price is down over 40%, as its market capitalization currently stands at 154.77 billion.

The company added that it’s “doubling down on story development and creative excellence,” and that it launched the “double thumbs up,” tool that will allow members to “better express what they truly love versus simply like.”

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Exchange rate falls at I&E window as FX supply drops

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Monday, 23rd May 2022: The exchange rate between the naira and the US dollar closed at N420.33/$1 at the Investors and Exporters (I&E) window, where forex is traded officially.

Naira depreciated by 0.31% compared to N419.02/$1 recorded as of the close of trading activities on Friday, 20th May 2022. Also, a total of $72.25 million in FX exchanged hands in the market on Monday, representing a 55.9% decline compared to $170.58 million traded in the past session.

Naira traded lower against the US dollar in the early hours of Tuesday at N606.2/$1, representing a 0.36% depreciation compared to N604/$1 recorded on Monday morning. This is also the highest rate recorded in the past eight trading sessions.

Meanwhile, the exchange rate at the parallel market recorded a 0.17% marginal gain to close at N604/$1 on Monday, compared to N605/$1 recorded as of the end of trading on Friday, 20th May 2022.

Nigeria’s external reserves depreciated further by 0.11% on Friday to stand at $38.75 billion from $38.79 billion recorded as of the previous day. The decline in the external reserve level can be attributed to the continuous intervention by the Central Bank in the FX market in order to ensure the stability of the local currency.

Trading at the official NAFEX window

Naira resumed trading activities for the week on a negative note, as the exchange rate depreciated by 0.31% to close at N420.33/$1.

  • The opening indicative rate closed at N418.54/$1 on Monday, 23rd May 2022, 19 kobo depreciation compared to N418.35/$1 recorded on Friday, 20th May 2022.
  • Furthermore, an exchange rate of N444/$1 was the highest rate recorded during intra-day trading before it settled at N420.33/$1, while it sold for as low as N413/$1 during intra-day trading.
  • A total of $75.25 million exchanged hands on Monday, representing a 55.89% decline compared to $170.58 million traded on Friday, last week.

Crypto market update

The crypto market closed bearish on Monday, as the industry lost 2.05% in market capitalization to stand at $1.25 trillion as of 22:46 (WAT). Flagship crypto asset, bitcoin recorded a 3% decline to trade at $29,357.44.

Similarly, Ethereum recorded a 2.2% price decline to trade at $1,996.03, while Solana at $50.445 recorded a 3.78% decline.

However, despite the downturn recorded in the previous trading session, the market started on a positive note on Tuesday, with a 0.61% industry capitalization growth as bitcoin already gained 0.68% in the early hours of Tuesday morning.

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Oil prices down over 1% on concerns over recession and China’s COVID restrictions

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Crude oil down

Prices of the black liquid are down by over 1% at the start of the London session on Tuesday, as concerns over a possible recession and China’s COVID-19 curbs outweighed an expectation of tight global supply and a pick-up in fuel demand with the U.S. summer driving season.

The global benchmark, the Brent crude futures, is down 1.25%, currently trading $109.50 a barrel. The U.S. benchmark, the West Texas Intermediate (WTI) crude futures is also down 1.17%, currently trading $108.96 a barrel. Brent gained 0.7% on Monday while WTI settled nearly flat.

Investors continued to be concerned about a possible recession. Some of the world’s well-heeled flagged the risk of a worldwide recession at the annual Davos economic summit which began on Sunday, May 22. Also weighing on the market is China’s COVID-19 restrictions.

What you should know

  • Multiple threats to the global economy topped the worries of the world’s well-heeled at the annual Davos economic summit, with some flagging the risk of a worldwide recession.
  • However, International Monetary Fund Managing Director Kristalina Georgieva said she did not expect a recession for major economies but could not rule one out.
  • While Shanghai, China’s commercial hub, aims to normalize life from June 1 as its coronavirus caseloads decline, an increase in new COVID-19 cases in Beijing has raised concerns for further curbs.
  • The Chinese capital detected 99 new cases on Sunday, up from 61 the previous day – the largest daily tally so far during a month-old outbreak that has consistently seen dozens of new infections every day.
  • The United States is set to enter its peak driving season beginning on Memorial Day weekend at the end of this week. This indicates that the demand for oil is set to increase.
  • Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd explained, “investors were selling off as they expected higher oil prices to dent consumption for fuels worldwide.”
  • Tina Teng, an analyst at CMC Markets stated, “China’s COVID lockdowns are certainly playing a substantial role that weighs on fuel and energy demand outlook, with Beijing reporting rising positive cases, making investors concerned about expanding lockdowns into another business hub apart from Shanghai.”

An embargo on Russian oil imports will likely be agreed on by the European Union “within days,” according to its biggest member Germany, as Moscow said it saw its economic ties growing with China after being isolated by the West over its invasion of Ukraine.

The world is facing an oil supply crunch, with most companies afraid to invest in the sector as they face green energy pressures, the head of Saudi Aramco told Reuters, adding it cannot expand production capacity any faster than promised.

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