Netflix Plunges Over 20% on Huge Miss on Subscribers: Q1 Earnings Report

Netflix, NFLX, Earnings Report, Subscriber Growth - Talking Points

• Netflix shares fall in after-hours trading after mixed Q1 earnings report
• 200,000 subscribers lost in the first-quarter, first drop in a decade
• Password sharing and suspension of services in Russia weighed on growth

Netflix fell sharply in after-hours trading following a mixed first-quarter earnings report. Investors were optimistic during today’s cash session, pushing shares over 3% higher into the closing bell. The streaming giant posted earnings per share (EPS) of $3.53, beating the $2.90 Bloomberg consensus forecast. That was on $7.8 billion in revenue, which missed the street forecast.

The real meat in this report, as always, is subscriber growth and forward expectations. Netflix lost 200,000 subscribers in Q1, well below the 2.5 million fourth-quarter guidance. The gut-wrenching figure comes after the company suspended operations in Russia due to Putin’s invasion of Ukraine. Subscribers were also turned away by a recent price hike. Some analysts worried that a price hike amid soaring inflation would put too much of a burden on potential customers, and it seems that those fears are playing out.

Netflix sees a net change of -2 million subscribers for the second-quarter, a seasonally weak period historically. The street expected subscriber guidance of around 2.5 million, constituting a huge miss. The mega-hit show Stranger Things, due to hit screens late next month, offers little help in the face of such grim expectations. Operating margin, a key statistic for investors, also missed estimates at 21.5% vs 21.6%. The sharing of passwords, said to be at over 100 million, was noted as a headwind to growth.

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--- Written by Thomas Westwater, Analyst for DailyFX.com

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