Wall Street lacks consensus on Netflix forecast, shares fall

Revenue and earnings for the first quarter, revealed in an earnings report on Tuesday, were broadly in line with Wall Street’s expectations, according to analyst estimates from Refinitiv. Earnings per share reached $2.88 on revenue of $8.162 billion.

Netflix shares fell 11% in after-hours trading after the report, but recovered most of the losses to trade less than 1%.

From January to March, Netflix added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions.

The company launched its solution for password sharing in 12 countries in February. Netflix said it moved a wider launch to the second quarter, meaning it won’t turn a profit until the end of the year.

“We are confident this will result in better outcomes for our members and our business,” the company said. It also said it was “on track to meet our full year 2023 financial objectives.”

For April to June, the company anticipates $8.242 billion in revenue and $2.86 in diluted EPS. Wall Street was projecting $8.476 billion for revenue and $3.05 for diluted EPS.

Netflix serves as a bellwether for the streaming industry, which has seen growth slow as competition intensifies.

A year ago, Netflix lost 200,000 subscribers — its first subscriber decline in more than a decade, which shocked its stock and reset Wall Street’s expectations for the sector.

Netflix will add about 9 million subscribers in 2022, more than half the 18 million it gained in the prior year, with much of that growth coming from Asia, notes research firm MoffettNathanson. The firm said the gains made in Asia and Latin America have affected average revenue per user, prompting Netflix to make changes to its business model.

The company introduced a low-cost version of its service with ads in 12 countries in the fourth quarter.

Netflix also officially launched its solution for password sharing in 12 countries in February.

In its quarterly letter to shareholders, Netflix said it was “pleased” with the launch of its paid sharing effort and planned a wider rollout this quarter, including in the United States.

The company has said that 100 million households are sharing passwords, including about 30 million households in the US and Canada.

According to MoffettNathanson’s estimate, if Netflix could convert 100% of those password-sharers, that would generate $4.4 billion in incremental revenue.

UBS Media analyst John Hodulik wrote that the password-sharing crackdown could well boost Netflix’s nascent advertising business, as it drives these “sharers” to a lower-priced version of the service.