Streaming video platform share Netflix (NFLX -8.65%) On Friday, the stock price fell sharply after the company announced its first quarter 2024 financial results. While the company’s numbers looked impressive, investors appear concerned about potentially confusing changes to its upcoming disclosures. As a result, Netflix stock was down 8% as of 11:45 a.m. ET.
A strong quarter was overshadowed by doubts
In the first quarter, Netflix continued to build on recent improving business trends. The company’s revenue increased 15% year-over-year to $9.4 billion, marking the third consecutive quarter of accelerating growth. Also, operating income was $2.6 billion, the highest quarter ever for this metric.
Netflix executives also offered an upbeat outlook for the remainder of 2024. Specifically, sales growth is expected to be between 13% and 15%, which is impressive for a company of this size. The company also raised its full-year operating profit margin forecast from 24% to 25%.
All of this was good, but investors couldn’t overlook the change in Netflix’s management. The company constantly reports subscriber metrics. For example, it had 270 million paid members at the end of the first quarter, an increase of 16% year over year. But starting next year, Netflix will no longer regularly report this number.
Investors believe this change means Netflix will lose subscribers in the future, which is why the stock price has fallen.
Does it matter?
It’s important to point out that Netflix doesn’t think that way. Management says that unlike in the past, there are now multiple subscription tiers and advertising, so subscriber numbers are less important than they used to be. In other words, when Netflix had only one source of revenue, its subscriber numbers were directly correlated to its financials. That’s not the case now.
Regardless, it looks like Netflix could still easily provide subscriber numbers if it wanted to. Therefore, some concern is valid. It’s not necessarily a red light, but probably a light yellow light.
That said, Netflix’s numbers for the first quarter were still impressive, and its guidance for the year was strong. Investors shouldn’t allow unanswered questions to completely undermine this strong performance.
