Netflix achieved its best first-quarter results since 2020, attracting more new customers than expected, largely as a result of the company’s decision to remove the ability to share passwords.
The company added 9.33 million new subscribers in the first quarter of 2024, according to its first-quarter results, nearly double the average of 4.84 million analysts estimated.
Netflix attracted new customers from around the world, with the strongest new subscriber interest from the US and Canada.
The new subscribers also helped beat forecasts for sales and earnings.
Still, Netflix stock fell as much as 6.6% in premarket trading on Friday.
Expectations for the first quarter had soared in recent days as one analyst after another published upbeat estimates.
In its letter to investors on Thursday, the company said it will stop disclosing revenue per subscriber based on quarterly subscriptions, starting in the first quarter of 2025.
Those metrics have long been the main way Wall Street evaluates a company’s performance, but Netflix has tried to shift the focus to traditional figures like sales and earnings. Management will continue to report significant subscriber milestones.
“The move to no longer disclose quarterly subscriptions starting next year will not go down well,” Paolo Pescatore, founder and analyst at PP Foresight, commented in an email to Bloomberg.
The road to recovery
Netflix has bounced back from a slowdown in 2021 and 2022 to grow at its fastest pace since the early days of the coronavirus pandemic.
This is largely due to the ban on access account sharing. The company estimated that more than 100 million people were using an account for which they were not paying. While Netflix executives were wary of customer backlash, the company managed to convince millions of loyal users to pay to access the platform.
The streaming service accounts for about 8% of U.S. viewership — and is a leading television network in most of the world’s major media markets.
“With more than two people per household on average, we have an audience of more than half a billion people,” the company said in a statement.
The recent growth has lifted Netflix stock back to record highs, giving the company a market value of more than $260 billion.
Some analysts worry that Netflix stock is trading at a valuation that far exceeds the company’s fundamentals. The company posted sales of $9.33 billion, up 15%, beating estimates of $9.26 billion.
Net income rose to $2.33 billion, or $5.28 per share, also above forecasts.
Even pessimistic analysts, as Bloomberg points out, have been impressed with the company’s recent performance, which is upgrading price targets for investors.
To sustain its growth in the future, Netflix also introduced a cheaper version of its ad-supported service aimed at customers looking for lower costs. It has also begun to invest in live programming, including stand-up specials and boxing.
About 40% of new Netflix customers choose the ad option in markets where it’s available, the company said.
Source OT
#Netflix #gained #million #subscribers #checkmate #move
