Shares of Netflix, Inc. NFLX fell sharply in after-hours trading on Thursday following its first-quarter earnings release. Fund manager Gary Black and tech venture capitalist Gene Munster weighed in with their takes on the report.
The company reported first-quarter earnings, revenue, and subscriber numbers that all beat estimates. However, it cautioned that subscriber numbers could decline sequentially in the second quarter due to seasonality, and also issued below-consensus revenue guidance for the quarter. The earnings per share guidance, however, was above expectations.
What Put Off Investors? “Perhaps troubling investors was Netflix’s announcement that it would stop providing quarterly paid membership numbers (and presumably net adds) starting in 2025/Q1,” said Black in a post on X.
The company faces tougher comparisons starting in the third quarter, which would mark the anniversary of its password-sharing crackdown efforts, Black added. Skeptics may be seeing the company’s decision not to provide membership numbers as a way to avoid showing slowing paid membership growth going forward.
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True Tech Company? Following the earnings call, Munster said, “Netflix is doing everything right, but the growth opportunities don’t meet my hurdle for a true tech company.” Here are some key takeaways from the VC’s analysis:
- Business is doing great and the management team is world-class, with solid revenue growth and expanding margins.
- The potential fading away of the benefits of password sharing crackdown next year is a big negative. Munster noted that the management still expects the tailwind to last “several more” quarters.
- Netflix could increase the $17 billion annual content spend but it may not be yet ready for live sports coverage and will continue to focus on original content. “They are ‘not anti-sports but pro-profitable growth,'” Munster said.
- As for pricing, the tech analyst said he expects another 15% price increase in May 2025.
- Netflix’s approach to generative AI approach was “as expected and ho-hum,” Munster said, adding that it is not an AI company.
Netflix ended Thursday’s regular session down 0.51% at $610.56 and fell a steeper 6.53% to 571.25 in Friday’s premarket trading, according to Benzinga Pro data.
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