Updated April 19th, 2024 at 18:19 IST

Netflix shares decline amid concerns over growth outlook

While Netflix reported new customer additions in the first quarter, its second-quarter revenue forecast fell short of market expectations.

Reported by: Business Desk
Netflix | Image:Unsplash
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Shares of Netflix slid on Friday following the company's announcement that it would cease sharing subscriber additions and average revenue per member from 2025, sparking concerns among investors about potential growth constraints in key markets for the streaming giant.

The decision to withhold crucial metrics, which have traditionally influenced stock market performance, raised doubts about Netflix's growth trajectory, particularly in North America and Europe where analysts anticipate saturation in subscriber growth.

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Russ Mould, Investment Director at AJ Bell, remarked, "Investors value transparency, and Netflix has long been evaluated based on its subscriber success. The decision to withhold these metrics comes at a time when questions are arising about Netflix's maturity in various regions."

While Netflix reported new customer additions in the first quarter, its second-quarter revenue forecast fell short of market expectations. The company's stock fell 6.6 per cent before the bell, with its market valuation poised to decline by over $17 billion.

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The downturn in Netflix's shares also weighed on peers such as Roku and Walt Disney, reflecting broader concerns within the streaming industry.

Netflix's move to halt reporting on key metrics adds complexity to the debate surrounding its future growth prospects. Analysts will closely monitor the sustainability of its paid sharing initiatives, while assessing the potential impact of removing these metrics on investor sentiment.

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Despite these challenges, Wedbush analyst Alicia Reese noted that competitors are unlikely to displace Netflix's dominant position in the streaming market. The company's ad-supported streaming plans attracted 9.3 million new customers in the first quarter, surpassing analyst expectations and underscoring its global reach.

(With Reuters inputs)
 

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Published April 19th, 2024 at 18:19 IST