Netflix nosedives 21% as it posts loss of 200,000 subscribers

Pascal Le Segretain/Getty Images News

Netflix stock (NASDAQ:NFLX) tanked after hours Tuesday, sliding 20.5%, as it fell short of even modest subscriber growth expectations, posted a loss in subscriptions and forecasted even more rough times ahead.

Netflix (NFLX) said it lost 200,000 subscribers on a net basis, well short of its scaled-back guidance for additions of 2.5 million subscribers. It was Netflix's (NFLX) first subscriber loss in a decade, and left the company down to 221.64 million global subscribers compared to 221.84 million at the end of 2021. And Netflix (NFLX) is also forecasting a drop of 2 million net subscribers for the second quarter of this year.

That comes though the company beat profit expectations with earnings of $3.53 a share, on revenue that grew 10% from a year ago, to $7.87 billion. For its second quarter, Netflix (NFLX) said it expects to report sales of $8.05 billion, while analysts had forecast $8.22 billion in revenue for the quarter ending in June.

It's blunt in its message to investors: "Our revenue growth has slowed considerably ... Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds."

Netflix (NFLX) added that its overall business picture was obscured by the big pandemic boost to streaming.

The company adds it will hold operating margin around 20% as it looks to reaccelerate revenue growth through "improvements to our service and more effective monetization of multi-household sharing."

Operating income ticked up only slightly, to $1.972 billion from a $1.96 billion a year ago, and operating margins fell to 25.1% from 27.4% in the first quarter of 2022.

Free cash flow - negative for each of the past three quarters - was positive at $802 million, amid a big boost to net cash from operations, to $923 million.

Netflix's earnings interview - where executives answer questions about the quarter, and moderated this time by J.P. Morgan's Doug Anmuth - is set for release at 6 p.m. ET.

Comments

[karondongotbanned]

long netflix at 350 a share, i bought some yesterday but oh well.

[Djreef1966]

@karondongotbanned Doh!!!

Well, you could always double down and split the difference.

[Tucku]

@karondongotbanned
You know them cool kids are collecting experiences, rather than things.
Plus now you can give the taxman the finger, with an early bumper harvest of tax losses.

[qwerty11]

Down 40% now...

[my_symphony2003]

Another ridiculously inflated stock is Amazon.

[ritholtz47]

@my_symphony2003
AMZN is going to nose I think. It is going to see RIVN share price effect on GAAP, tough comps and streaming headwinds. AWS is going to support share price after the drop i guess.

[Djreef1966]

@my_symphony2003 All of FANGMAN is ridiculously inflated.

Cathie is about to become a footnote.

[achi3l]

@my_symphony2003 $Appl, $MSFT ARE worse. $GOOG is okay. I wouldn't touch any of them tbh.

[my_symphony2003]

Need to go 80% lower from here to reflect its true business worth.

[MySami]

200,000 drop in subscriptions, only a spit in the bucket and the stock price plunges over 100 points? Give me a break stupid short-seller...not that I ever owned any NETFLIX shares, but honestly folks, this small loss of subscribers were only those folks who returned back to the office over the past 3 months from Covid, these folks were simply subscribers the during Covid shutdown, they never intended to stay subscribers for long.

[Gary J is Rich on AMZN]

@MySami

"And Netflix (NFLX) is also forecasting a drop of 2 million net subscribers for the second quarter of this year."

Try to keep up.

[Wez]

@MySami

Growth stocks are priced on growth buddy, that growth has slowed dramatically.

Hope this helps.

[speakerforthemoose]

@Gary J is Rich on AMZN
That's 1% of subscribers. That takes them down to about 220 million. Or 7 million more than they reported in the third quarter.

[SeriousUsername]

As a FB shareholder I welcome all Netflix shareholders to the -25% in one day pain club.
We dont have drinks we lost the money to buy those unfortunately.

[wanster]

@SeriousUsername Just throw the empty glasses into the fireplace ~

[Wolf Report]

I'm not surprised in the least. This is why I'm not long any company in the streaming/content space.

[achi3l]

@Wolf Report Small $WBD holding at most. Everything else has sky high valuation and $DIS holders are about to get destroyed

[Diesel]

DIS holders already got destroyed.

[Jonk]

Maybe people just grow up after a while and grow out of this stuff.
Myself I never grew into it.
Kaboom.

[Stefan Redlich]

If they stop password sharing they will lose even more subscribers as password sharing also means cost sharing for the subscribers.

[Publius Valerius]

@Stefan Redlich Another poster brought up a good point. Since NFLX subscriptions inherently state the max number of simultaneous screens that can watched, what does PW sharing matter...?!?

[Mevo]

@SGK The trick is "simultaneous": More people than the "max screens" number can use the same subscription as long as they don't watch at the same time.

Just on a theoretical thinking: If you have people agreeing together to each have a 2 hours per day slot, 12 people could fit into each "max screen" of a subscription. You could share a 4 simultaneous screens between 48 people ;)

People knowing each other can message themselves to see when they is room available. They can even update a status of an app dedicated to this. 10 people not watching too much can easily share a 4 screens subscription.

Even 4 single people will pay less by sharing a 4 screen subscription than having each a 1 screen one. And they can then each watch as much as they can/when they want.

[Publius Valerius]

@Mevo But then NFLX is being deceitful/disingenuous with their marketing.

If I pay for a 4-screen subscription, I am really paying for 96 hrs/day of programming. None of their business what my sleeping habits are or whether I leave my screens running 24/7 w/o anyone actually watching. I pay for 96 hrs/day of programming.

Now, even if I share my pw, there is no way that 96 hrs/day can be exceeded. NFLX just wants to harvest more money from multiple watchers for that same theoretical 96 hrs/day - i.e. they want more money for no additional service delivery. I wonder if this can be challenged in court....?

[r Negoro]

Basically it's not going to grow anymore subs ?

[WelshWB]

The claim that Netflix is underperforming because its gone 'woke' is utter nonsense!

Look at the facts i.e. the number of streaming platforms have emerged? This has given consumers far more choice and a reason to leave Netflix: Disney+, Hulu, HBO Max, Peacock and Amazon Prime.

In the past Netflix used to have unrivalled access to studio content and now it doesn't. Thats the reason why its business is heading down the dumpsters. Why is anyone surprised? Pre internet in the 90s videos was a huge money spinner for studios. Chances are studio are looking to reinvigorate revenue stream. Netflix will have to find its own content, which is really tricky.

If they stop password sharing I'm going Disney far better content!

[coroscant72]

@WelshWB - They had first mover advantage. They spent over 10 Billion on unwatchable content for most of the world, and you want to discount this as utter nonsense...?

Yes, they did lose all the content that was made in the past by better, more competent story tellers and producers. No one can argue that, but shouldn't their own production company that is spending like a drunkin sailor with access to better technology be able to compete with the content from the past...? If they aren't able to, why not? What has changed...?

[WelshWB]

@coroscant72 Most people with no political slant can see that Netflix hosted content from all studios which was the main attraction for Netflix not because it made its own content that was an added bonus.

Netflix production can only be described as hit and miss. Some were good but others weren't. The main reason for Netflix subscription was because it hosted content from third parties which is slowly dwindling away.

For example the most watched show is? Friends that sums up the problem with Netflix

www.joe.co.uk/...

[coroscant72]

@WelshWB - So are you saying that the NFLX business model is inherently flawed and that it needed a conglomeration of other peoples content to be a valuable company...?

I'm not going to go as far as that. I think that with the money they spend they have both the means and the capability to make competitive content. They just currently only produce certain type of scripts that do not resonate with anyone outside their group, and as such, is not really entertaining on scale. I also think your "hit or miss" analogy is a little generous.

I don't think NFLX can get the other, better written and produced products back on their service. On the other hand, they can get their act together and make a better product that could be enjoyed by a wider audience base. If the people in place currently cannot do this, then they need to be replaced with someone who can... or the multiple needs to compress a hell of a lot more.

Also, think the link you shared is a little old. I don't think Friends is on NFLX anymore (Warner Media content). Maybe NFLX still has the streaming rights in the UK, but they don't in the States.

[mpcascio]

I couldn't be happier.

[joshk45]

Not surprising at all. NFLX went WOKE and this is the outcome!

[kimboslice]

Go woke, go broke.
I was an early Roku owner so I could stream Netflix; I cancelled it years ago.

[ptusr]

My thought here with this industry …. Consolidation.

[JRHighley]

I hope they just keep falling. Go woke, go broke. Haven't had a subscription in more than a year, and I don't miss it one bit. Nothing new is worth watching. It's all garbage.

[r Negoro]

Dude 200,000 subs lost is crazy. They scraped by increasing fees.

[tjcons]

After hours nflx is down almost 65% from high some 4-5 months ago. This is an example of forward looking market doing its thing. It would appear a lot of the bad news is baked in. I took the chance and bought after hours. My first thought was get a 5 spot or so tomorrow and walk away. Now, I'm not so sure. Netflix is still the the largest streaming company with very good management. Might stick around awhile.

[fadecutmike]

@tjcons same here, hopefully I dont wake up tonight around 4 am and check my phone..

[JeffSizemore]

@tjcons time for a stock split

[karondongotbanned]

@tjcons netflix fair value is 180

[Tulip hoard]

People still pay to watch this crap? My god go outdoors, get a hobby, get off your collective arsses, seriously .....💩

[Concernedabout]

Just short term noise. Insane subscriber numbers pulled forward by the pandemic needs time to reset to sustainable levels. We see a lot of “veteran investors” in the comments. Doubt any of them act where their mouth is. Netflix is a stock that must be added to the long term portfolio.

[jeffk100]

@Concernedabout stock price needs to reset from insane pull forward too so this is far from short term noise

[tensei]

@Concernedabout if you like the streaming business why not go for HBO max that has the warner studios at 1/3 of the valuation (WBD)