Netflix May Be in Trouble

By Douglas A. McIntyre Published Jul 18, 6:45AM EDT

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The slowing subscriber count at Netflix Inc. (NASDAQ: NFLX | NFLX Price Prediction) 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?

Be sure to grab a copy of our “2 Dividend Legends to Hold Forever” report if you are looking for more great stock ideas.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.