It looks like the positive economic effects the global coronavirus pandemic has bestowed on streaming giant Netflix is about to end as the most recent letter to shareholders reveals that subscribers and earning targets have not been achieved.
Variety reports that the streaming service was unable to meet its forecasted 2.5 million new paid subscribers, only managing to gain 2.2 million in the third quarter of the year. While Netflix revenue was up 22.7 percent at $6.44 billion, its earnings per share (EPS) did not meet the expected $2.13. EPS for the third quarter was only $1.74.
The number of paid subscribers Netflix has is now at 195.15 million, which is an increase of 23.3 percent year over year. Netflix is now forecasting that it will add 6 million new paid subscribers by the fourth quarter, below the 8.8 million that they forecasted last year.
CNBC reports that the numbers released by Netflix have resulted in a drop in their shares by as much as six percent during after-hours trading.
In the same letter to subscribers announcing the missed targets, Netflix also assured its investors that the dip in growth was not a surprise since their growth in the earlier quarters of the year was boosted by lockdowns brought about by the global coronavirus pandemic.
Netflix executives also expressed hope that the company’s subscriber growth will revert back to pre-COVID levels once the world recovers from the pandemic next year.
The streaming giant certainly has reason to hope, as evidenced by a Piper Sandler survey last August that helped push its stock to another all-time high. The survey revealed that 41 percent of 1000 Americans surveyed would retain their Netflix subscription even after COVID-19 restrictions are lifted.
Netflix performed better in the survey against competing streaming services. Of the people subscribed to Amazon Prime Video, only 28 percent had plans of sticking with the service after the lifting of restrictions. Only 17 percent of Disney+ subscribers planned to continue using the service, while only seven percent of HBO Max users planned to remain as subscribers.
Because of the survey results, Netflix stock went up as high as $549.04 during the day and closed 11.6 percent higher at the end of trading at $547.53.
Whether the streaming giant can return to pre-COVID numbers depends on the global coronavirus pandemic state by 2021. As of now, the World Health Organization’s COVID-19 dashboard for Oct. 20 pegs the number of confirmed COVID-19 cases at 40,251,950 people. Deaths caused by COVID-19 are now at 1,116,131 people.