Netflix May Be in Trouble

Investing

Published: July 18, 2024 6:45 am

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The slowing subscriber count at Netflix Inc. (NASDAQ: NFLX) matters to shareholders.
The stock has underperformed the Nasdaq so far this year.

Data from the widely followed LSEG shows that Netflix Inc. (NASDAQ: NFLX) added the fewest number of subscribers in five quarters in its count from April to June. The research firm said Netflix’s efforts to stop people from using shared passwords are the primary reason. Netflix shares have stalled, partly because of fear that it cannot keep up with its recent subscriber growth rate.

LSEG experts said Netflix added only 4.82 million subscribers in the second quarter, compared to 9.3 million in the first quarter. However, Reuters reports there may be a silver lining: “Still, the streaming giant’s efforts to sell a lower-priced ad-supported tier have yielded strong ad revenue growth. The company’s ad revenue is expected to have more than doubled in the June quarter.”

Netflix shares are up only 17% this year, compared to Nasdaq’s 33% gain. The company will post second-quarter results later this week.

The streaming wars have been brutal recently, but many investors believe Netflix will not be hurt because it is the market leader. Netflix ended the last quarter with 270 million subscribers across 190 countries. Its only real competition in terms of subscriber count is Amazon. It has about 200 monthly “viewers,” but subscriptions are usually part of its Prime service. Disney ranks third with 154 million. However, Disney has lost billions of dollars in building its subscriber count.

Does the slowing subscriber count matter to Netflix shareholders? The most straightforward answer is yes, but what will happen when the second-quarter results are announced?

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