Netflix began the year of 2024 stronger than it has in the past four years, drawing in more new subscribers due to its offering of unique content and firm stance on password sharing. The firm disclosed in a statement on Thursday that it has acquired 9.33 million new customers in the first three months, almost twice as much as the 4.84 million average forecasted by market analysts.
Netflix has managed to allure fresh subscribers across the globe, demonstrating remarkable success particularly in America and Canada. These new subscription numbers have fortified the company’s revenue and earnings, surpassing expectations.
Regardless of this growth, Netflix’s shares fell by 4.6% to $582.70 at 18:03 New York time, even though they had risen 25% this year up until the end of regular trading on Thursday.
Market expectations for Netflix’s Q1 performance had been significantly elevated lately, fuelled by optimistic predictions by numerous analysts. The company, in its recent shareholders’ letter, mentioned that it expects a slower subscriber growth rate for the next period but projects a revenue increase of 16%.
Starting in Q1 of 2025, Netflix aims to stop the practice of reporting the number of paid memberships per quarter and revenue per subscriber. While these have traditionally been the main metrics for financial analysts to gauge the company’s performance, Netflix has been attempting to direct focus towards conventional measures such as sales and profits. Key milestones pertaining to subscriber numbers will still be reported by the management.
However, the decision to cease reporting quarterly subscriptions may not be welcomed, as pointed out by Paolo Pescatore, analyst and founder of PP Foresight. This could be especially problematic in the light of the significant subscriber growth experienced by Netflix in the past year.
After a sluggish growth period in 2021 and 2022, Netflix has bounced back to expand at its fastest pace since the start of the COVID-19 pandemic. This was largely facilitated by a crackdown on users accessing the service using the account details of others. It’s estimated that over 100 million users had been using an account without paying for it. Despite the apprehension of potential customer dissatisfaction, Netflix managed to convince millions to cough up for a legitimate subscription.
This influx of legal subscribers has invigorated Netflix’s catalogue, with the release of several successful titles so far this year, including limited series like ‘Fool Me Once’ and ‘Griselda’, dramas ‘The Gentleman’ and ‘3 Body Problem’, and the reality show ‘Love Is Blind’.
Netflix, a dominant force in global media, constitutes about 8% of TV viewership in America. Globe-spanning markets also recognise it as a leading television network. The company revealed in recent correspondence that, averaging over two individuals per household, the network reaches more than 500 million individuals globally. They claimed that no other entertainment company has ever aimed or operated at such a large scale.
Following recent growth, the value of Netflix shares neared all-time records, boosting the company’s market worth past $260 billion; it peaked with an all-time closing high of $691.69 in November 2021. However, there are concerns amongst some analysts that Netflix’s trading valuation greatly surpasses the basic business principles.
Nevertheless, Netflix reported a 15 per cent increase in sales, bringing in a better-than-expected $9.33 billion. Net income also exceeded projections, reaching $2.33 billion or $5.28 per share.
Despite these promising figures falling below smaller valued companies and the temporary benefits from stronger account sharing restrictions, Netflix’s lack of growth timeline has been disconcerting. Still, despite their skepticism, analysts have been encouraged by Netflix’s recent showing; they’ve even raised stock pricing targets for investors.
In a bid to maintain its growth, the company has launched a more affordable, ad-supported version of its service, appealing to budget-conscious consumers. They’ve also started putting funds into live programmes, including stand-up specials, wrestling, and an upcoming boxing match.
Netflix disclosed that 40% of its new subscribers opt for the ad-based plan where it’s available. However, compared to online video heavyweights like YouTube, this advertising tier remains fairly small. [source: Bloomberg]