Mid-range Netflix Inc. bonds were active in early trading today after the company reported in-line earnings for the fourth quarter but forecast surprisingly slow subscriber growth in the coming months.

Netflix management cited growing competition and a strong U.S. dollar among the factors weighing on its growth numbers as it reported adding 8.3 million worldwide subscribers in the final months of 2021 — about 200,000 fewer than management had anticipated. First-quarter projections of 2.5 million new subscribers are lower than the 3.98 million added in the first quarter of 2021 and well below Wall Street expectations of 6.93 million for the period. Netflix gained more than 36 million subscribers during 2020.

Traders reported active flows in Netflix bonds throughout the European trading session where they opened around a point lower. Most active of the borrower's substantial stack of senior unsecured notes at the U.S. open were the 5.875% 2028 bonds, which recouped 0.75 point to trade at 116.75 midmorning. Since then, the 4.875% 2030 notes have become the preferred trade, changing hands an eighth of a point off their early lows, at 112.5, for a yield of around 3.124%.

Last night's report triggered a wave of equity downgrades similar to what followed weak subscriber numbers in the first quarter of 2021 when Netflix reported otherwise-solid earnings numbers. Among the first to drop the axe was Barclays, which downgraded NFLX stock to equal weight from overweight and lowered its price target to $425 per share from $675.

"The company's Q1 net add guide is surprisingly low and points to the slowest Q1 ever despite Q1 performance being correlated with Q4 net adds outside of Covid periods and Q4 being relatively strong in absolute performance," the firm stated.

Netflix mirrored consensus estimates with fourth-quarter revenue of $7.71 billion and delivered a solid beat with earnings of $1.33 per share where the Street was calling for 88 cents Revenue guidance of $7.9 billion for the first quarter of 2022 was below consensus of $8.15 billion. The company last week raised prices on its North American streaming packages in an effort to boost revenue and fund new programming, which analysts claim may have pushed some subscribers to rival providers.

Operating margins for the quarter were 8.2%, down from 14.4% a year earlier — a drop the company attributed to its expensive third-quarter programming lineup. Management continues to target investment-grade ratings and maintains that Netflix will be cash-flow positive in 2022.