Netflix’s Stock Drops as Some Investors Fret About Ending Subscriber Data, Softer Revenue Forecast

Netflix’s Stock Drops as Some Investors Fret About Ending Subscriber Data, Softer Revenue Forecast

Despite Netflix hitting another quarterly fiscal home run, Wall Street, early April 19, the day after the streamer’s first quarter results, saw the company’s stock drop more than 8% in value — the biggest decline since last July.

Investors were apparently spooked over current second quarter (ending June 30) revenue estimates of around $9.49 billion, below Street projections of above $9.5 billion, and the streamer’s decision to stop reporting subscriber numbers beginning in 2025.

Wall Street appeared to ignore the streamer’s $9.37 billion in Q1 revenue, which was ahead of the projected$9.28 billion; net income of $2.3 billion, which exceeded $1.98 billion in estimated profit; and 9.33 net new subscribers ahead of the projected 5.1 million new subs. Netflix’s earnings per share of $5.28 beat estimates of $4.50 per share.

And the streamer’s ad-supported subscription option continues to resonate with consumers, accounting for 40% all new subscribers.

“Netflix’s decision to phase out reporting quarterly membership figures caused uncertainty and a stock sell-off,” Michael Wiggins De Oliveira with Seeking Alpha, wrote in an April 19 post. “The lack of transparency in membership figures suggests the Company is no longer a growth stock.”

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, agreed that Netflix’s announcement to stop reporting subscriber data a year from now could be a surprise to investors.

“However, this decision is consistent with our oft-repeated assertion that Netflix would inevitably pivot from a high-growth, low-profit business to a slow-growth, high-profit business,” Pachter wrote in a note.

The analyst contends the stock price decline is a minor bump in the road considering Netflix outsized SVOD market domination. The streamer’s annual content spend is just 35% below the $26 billion bid Apollo Capital submitted to buy Paramount Global, which includes Paramount Pictures and Paramount+ streaming platform.

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“We think Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability,” Pachter wrote. “We think Netflix will continue to expand profitability and generate increasing cash flow.”

Jeffrey Wlodarczak, CEO, internet, media & communications analystPivotal Research Group, in New York, dismissed Wall Street concerns as an overreaction.

“It is abundantly clear that Netflix is demonstrating massive scale as it continues to produce strong subscriber results and free cash flow with the ability to invest to accelerate that growth … while its streaming peers continue to generate substantial losses,” Wlodarczak wrote in a separate note.

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