Video streaming platform shares Netflix (Nasdaq: NFLX) It fell on Friday after the company reported its financial results for the first quarter of 2024. The company's numbers looked impressive but investors seemed concerned about the confusing change in its disclosures going forward. As a result, Netflix stock was down 8% as of 11:45 a.m. ET.
A good quarter was overshadowed by a question
In the first quarter, Netflix continued to build on recent improving trends in the business. The company's revenue rose 15% year-over-year to $9.4 billion – the third consecutive quarter of accelerated growth. And it was Operating income At $2.6 billion, the best quarter ever for this metric.
Netflix management provided optimistic guidance for the rest of 2024 as well. Specifically, it expects revenue growth of 13% to 15%, which is impressive for a company of this size. She raised her full year Operating margin Guidance to 25%, up from previous guidance of 24%.
Although all of this was good, investors couldn't look past the change in Netflix's management. The company always reports its subscriber metrics. For example, it ended the first quarter with 270 million paid memberships, an increase of 16% from the same period a year earlier. But starting next year, Netflix will no longer report that number regularly.
Investors believe that this change means Netflix will lose subscribers in the future, which is why the stock is down.
Does it matter?
It's important to note that Netflix doesn't see it that way. Management said that, unlike times past, it now has multiple subscription and advertising levels, making its subscriber count less important than it used to be. In other words, when there was only one source of revenue for Netflix, its subscriber number was directly tied to its cash. now no.
However, it appears that Netflix could still easily provide the subscriber number if it wanted to. Therefore, a certain degree of concern is valid. I wouldn't necessarily call it a red flag, but maybe a bright yellow flag.
However, numbers remained great for Netflix in the first quarter and guidance for the year was strong. Investors shouldn't let the unanswered question completely detract from this strong performance.
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Why did Netflix shares fall today? Originally published by The Motley Fool
