Once a Wall Street darling, Netflix (NASDAQ:NFLX) is now considered a left-behind as the market obsesses over Magnificent Seven stocks. Nowadays, positive earnings results aren’t enough to get investors enthused about Netflix stock.
Yet, today you can be a leader instead of a follower. I invite you to contravene the crowd, embrace change and build a confident position in Netflix stock.
Netflix is evolving in multiple ways. The company is betting big-time on the Latin American entertainment-content market, for example. Furthermore, Netflix is basically going all-in on original content this year.
However, there’s another change that’s making some of Netflix’s stakeholders nervous. Don’t fret, though, as it’s actually a good change that should benefit Netflix in the long run.
Netflix Stock Drops Despite Positive Earnings Results
April 19 wasn’t a great day for Netflix’s shareholders. On that day, Netflix stock fell 9.1%. The company had just published its first-quarter 2024 financial and operational results – but the results actually weren’t bad.
Just to recap, Netflix added 9.33 million net new subscribers in Q1 2024, easily beating the consensus estimate of 5.1 million. Moreover, the company’s quarterly revenue grew 15% year over year to $9.37 billion, while analysts had only expected $9.27 billion.
In addition, Netflix earned $5.28 per share in 2024’s first quarter, versus Wall Street’s call for $4.51 per share. So, there’s nothing objectionable in the company’s actual results.
Looking at the current quarter, Netflix guided for $9.49 billion in revenue, up 16% YOY. The analysts’ consensus estimate called for $9.52 billion in revenue, so Netflix’s guidance wasn’t very pessimistic. Also, the company expects to earn $4.68 per share in the current quarter, and that’s higher than Wall Street’s forecast of $4.54 per share.
Netflix Seeks More Meaningful Metrics
What prompted the massive selloff in Netflix stock, then? Mainly, it was the company’s decision to cease reporting its subscriber count, starting in 2025.
Some stock traders might worry that they’ll be in the dark as Netflix stops disclosing its subscriber numbers. However, there are valid reasons why Netflix would make this change.
Think about it. Netflix has a variety of subscription tiers with different price points. The company introduced an advertisement-supported subscription tier not long ago. Therefore, simply counting the number of subscribers doesn’t properly reflect or measure Netflix’s financial growth.
Macquarie analyst Tim Nollen actually welcomes Netflix’s controversial decision to shift the focus to “more important fundamental metrics.”
Presumably, these metrics would include revenue and EPS. Macquarie posits this shift could enable Netflix to “provide more meaningful engagement metrics and more ad tier-related info over time.”
Build Wealth Over Time With Netflix Stock
Netflix explained that “each incremental paid membership has a very different business impact.” So, it actually makes sense for the company to focus on more important business metrics than subscriber counts.
Besides, Netflix just posted solid quarterly results. The market reacted by panic-selling Netflix stock.
Instead of following the crowd, I encourage you to take advantage of the market’s irrational behavior and build your wealth. Just grab some shares of Netflix while they’re down – and most importantly, embrace change instead of fearing it.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
