Netflix Sinks on Weak Subscriber Growth View: ETFs in Focus

Netflix (NFLX) reported solid fourth-quarter 2021 results after the closing bell on Thursday but spread pessimism forecasting weak first-quarter subscriber growth. The world's largest video streaming company beat on earnings and revenues.

Disappointed by the weak subscriber guidance, shares of Netflix fell as much as 20% in after-hours trading to the lowest levels since June 2020, erasing about $45 billion in market value. As such, ETFs like MicroSectors FANG+ ETN FNGS, Simplify Volt Pop Culture Disruption ETF VPOP, Invesco NASDAQ Internet ETF PNQI, John Hancock Multifactor Media and Communications ETF JHCS and Roundhill Streaming Services & Technology ETF SUBZ, with the largest allocation to this streaming giant, have been in focus.

Q4 Earnings in Detail

The company reported earnings per share of $1.33, outpacing the Zacks Consensus Estimate of 82 cents and increasing from $1.19 in the year-ago quarter. Revenues rose 21.5% year over year to $7.71 billion and edged past the Zacks Consensus Estimate of $7.7 billion.

Netflix added 8.28 million new subscribers globally in the fourth quarter, below the company’s guidance of 8.5 million additions. With this, the company added 18.2 million customers in 2022, down about 50% from last year.

Netflix released high-performing content such as “Emily in Paris,” “Don’t Look Up,” “Red Notice” and “You” during the quarter (see: all the Technology ETFs here).

The steaming giant achieved several milestones in 2021. It had the biggest TV show of the year (Squid Game) and the two biggest film releases of all time (Red Notice and Don't Look Up). Overall, in 2021, Netflix series accounted for six out of the 10 most-searched shows globally while the films represented two of the top 10. Netflix was the most Emmy-winning and most-nominated TV network and the most Oscar-winning and nominated movie studio of 2021.

For the current quarter, Netflix expects to add 2.5 million new streaming subscribers, far below 3.98 million additions last year in the year-ago quarter. Subscriber growth is being hit by the ongoing COVID-19 pandemic and economic hardship in parts of the world such as Latin America. This suggests that the streaming giant might be entering a new phase of slower growth.

Netflix expects revenues and earnings per share of $7.9 billion and $2.86, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $8.11 billion for revenues and $3.43 for earnings per share.

ETFs in Focus

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix share coming in at 10%.

MicroSectors FANG+ ETN has accumulated $73.9 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 24,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: ETFs to Drive Tesla's Near $1 Million Vehicle Deliveries).

Simplify Volt Pop Culture Disruption ETF (VPOP)

Simplify Volt Pop Culture Disruption ETF is an actively managed fund, providing investors concentrated exposure to media platform leaders across streaming, social and Internet of Things. Netflix takes the eighth spot at a 9.2% allocation.

Simplify Volt Pop Culture Disruption ETF has amassed $1 million in its asset base. The product has an expense ratio of 0.95%.

Invesco NASDAQ Internet ETF (PNQI)

Invesco NASDAQ Internet ETF follows the Nasdaq CTA Internet Index, which measures the performance of companies engaged in Internet-related businesses listed on the New York Stock Exchange, NYSE American, Cboe Exchange or The Nasdaq Stock Market. The product holds 82 stocks in its basket, with Netflix occupying the fourth position with 7.5% of assets (read: Internet ETFs Looking Great Bets Amid Omicron Uncertainty).

Invesco NASDAQ Internet ETF has amassed $795.5 million in its asset base and charges 60 bps in fees per year. The fund trades in a light volume of 34,000 shares and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

John Hancock Multifactor Media and Communications ETF (JHCS)

John Hancock Multifactor Media and Communications ETF targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities by tracking the John Hancock Dimensional Media and Communications Index. It holds 55 stocks in its basket, with NFLX taking the third spot with a 6.9% share.

John Hancock Multifactor Media and Communications ETF has managed assets worth $18.6 million and charges 40 bps in annual fees. It trades in an average daily volume of about 1,000 shares.

Roundhill Streaming Services & Technology ETF (SUBZ)

Roundhill Streaming Services & Technology ETF debuted in February last year and has amassed $16.8 million in its asset base. It is actively managed and offers exposure to the streaming industry. The fund consists of companies from across the globe that are actively involved in the business of streaming.

Roundhill Streaming Services & Technology ETF holds 38 stocks in its basket, with Netflix occupying the third spot with a 4.9% share. SUBZ charges 75 bps in annual fees.

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Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
John Hancock Multifactor Media and Communications ETF (JHCS): ETF Research Reports
 
MicroSectors FANG ETN (FNGS): ETF Research Reports
 
Simplify Volt Pop Culture Disruption ETF (VPOP): ETF Research Reports
 
Roundhill Streaming Services & Technology ETF (SUBZ): ETF Research Reports
 
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