Netflix, a week before the report low expectations for the growth of the number of users

Next week, the streaming service Netflix Inc. (NFLX) plans to report the results of the first quarter of 2022. Most likely, this year the number of new subscribers will be almost three quarters less than in similar quarters of previous years. Netflix intends to present the results of the first quarter on Tuesday, April 19. Traditionally, the company adds at least 8 million subscribers in the first quarter.

At least this trend has continued since 2017. However, Netflix’s current forecast suggests the platform may attract only 2.5 million subscribers in the first quarter of 2022. Probably, the management can slightly lower expectations in order for them. But if the company really records such a low increase in users, then this may lead to a greater decrease in quotes.

Note that since the beginning of the year, NFLX shares have fallen by over 40%. Investors feared that the economic recovery and the end of lockdowns could dramatically reduce interest in streaming services. But is this such a serious problem for Netflix?

Currently, the Netflix platform with 222 million subscribers is the leader of the streaming video market. Its closest competitor, The Walt Disney Company, has already connected 100 million users. In 2021, Netflix’s revenue amounted to almost $30 billion, which gives the company the opportunity to invest in content that creates its main competitive advantage.

Last year, the company spent almost $18 billion on content, which is $6 billion more year-on-year. The increase in content costs is reasonable, since along with the increase in spending, there is an increase in operating profit. In the long term, the company has set a goal to increase the operating profit margin every year.

Thus, the projected slowdown in the growth of the user base may be a common occurrence for such a large company as Netflix. Faced with growing competition. The streaming service improves profit indicators, expands the content library, which creates the basis for maintaining leadership positions. In addition, a favorable situation is developing for Netflix, when users are increasingly abandoning traditional cable television in favor of streaming services.