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Internet television network Netflix (NFLX) late Tuesday surprised Wall Street with a net loss of subscribers in the first quarter. It then guided to an even bigger loss of subscribers in the current quarter. Netflix stock crashed in extended trading.
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The Los Gatos, Calif.-based company lost 200,000 subscribers in the March quarter. Analysts and the company’s own guidance predicted 2.5 million new subscribers in the period. The streaming video leader ended the first quarter with 221.6 million subscribers worldwide.
For the current quarter, Netflix forecast losing 2 million subscribers. Analysts had been counting on Netflix to gain 2.55 million subscribers in the June quarter.
“Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” Netflix said in a letter to shareholders. The company says it is working to better monetize its user base by cracking down on password sharing.
Netflix estimates that 100 million households worldwide are getting Netflix without paying because of account sharing. Of those freeloaders, over 30 million are in the U.S. and Canada, it said.
Netflix Stock Plummets
In after-hours trading on the stock market today, Netflix stock tumbled 25.2% to 260.69. During the regular session Tuesday, Netflix stock rose 3.2% to close at 348.61.
Netflix would have gained 500,000 subscribers in the first quarter if it had not suspended service in Russia in response to that country’s invasion of Ukraine. It lost 700,000 subscribers in Russia from the action.
While Netflix’s subscriber numbers were disappointing, its profitability was better than expected in the first quarter.
The company earned $3.53 a share on sales of $7.87 billion in the March quarter. Wall Street had predicted Netflix earnings of $2.90 a share on sales of $7.93 billion. In the year-earlier period, Netflix earned $3.75 a share on sales of $7.16 billion.
For the June quarter, Netflix expects to earn $3 a share on sales of $8.05 billion. Analysts had predicted earnings of $3.03 a share on sales of $8.22 billion.
Rivals See Their Shares Fall
Other streaming video stocks fell late Tuesday as Netflix stock cratered. Walt Disney (DIS) stock sank 5.5%. Warner Bros. Discovery (WBD) shares dropped 4.9%. Paramount Global (PARA) stock retreated 5%. Roku (ROKU) stock stumbled 6.5%.
Since hitting a record high of 700.99 on Nov. 17, Netflix stock is down about 63% in value.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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