“Red Is The New Black.”  Wall Street Loses Its Love For Netflix As The Streamer After Disastrous Earnings Call.”

Netflix did something this week it hasn’t had to do in recent memory; share a whole to of bad news on an earnings call. It was a blood bath, too, a report that would get an NC 17 rating if it was lucky, as CEO Reid Hastings had to explain how not only had Netflix not hit their projection of adding 2.5 million customers during the recent quarter, the streamer lost 200,000 subscribers. 

Wall Street was ticked. After the brutal earnings call, the stock price was punished, down 30%.  Netflix has long been one of Wall Street’s favorite stocks.  Not anymore if you read some of the reports from analysts. 

Michael Morris, an analyst for Guggenheim, wrote this in his report. 

“Reality Bites.” He cut the stock price target from $555 to $350 and added, “We are also moving Netflix as our best idea after a big quarter for surprises.”

Netflix pointed to one colossal problem they will have to fix somehow; password sharing. Hastings said over 100 million households are using a shared password. That includes 30 million password sharers in the United States and Canada. 

Netflix currently has 222 million paying subscribers. 

Here’s a quote from the company. 

“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets – an issue that was obscured by our COVID growth.”

Look for Netflix to make one significant change to make up for this loss in revenue. They will be adding advertising to their content. 

Here’s what Reid Hastings said in an interview after the earnings call. 

“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant [to] get what they want, makes a lot of sense.”