Netflix loses 970,000 subscribers

Ads and new fees are key to recovery

Netflix yesterday reported a loss of 970,000 paid streaming subscribers in its Q2 earnings after having lost 200,000 customers in the first quarter of 2022. The company’s worldwide paid memberships decreased from 221.64 million to 220.67 million in Q2, and revenue growth has slowed dramatically.

It’s the first time in Netflix’s history that the company reported consecutive quarters of subscriber losses, The Wall Street Journal wrote. But the result was better than forecasted, as Netflix had told investors to expect a second-quarter loss of 2 million subscribers.

Netflix co-CEO Reed Hastings said in a call with analysts yesterday that “losing 1 million and calling it a success” is “tough,” but he added that Netflix is “set up very well for the next year,” according to a Seeking Alpha transcript. The newest season of Stranger Things apparently helped prevent larger subscriber losses.

Netflix’s latest forecast is that it will add 1 million paid subscribers in Q3, bringing the total up to 221.67 million. Paid subscribers hit a peak of 221.84 million in Q4 2021 after 15 years of consistent growth following the company’s transition from DVDs to online streaming.

Could Netflix Become the Next Buffett Stock?

The stock down 75% from last year’s highs

Netflix‘s (NFLX 0.58%) results for the first quarter of 2022 shocked its shareholders. The company said it lost 200,000 subscribers — its first such decline in more than a decade. And because of the turmoil created by Russia’s invasion of Ukraine, Netflix warned it could lose 2 million more paying customers in the second quarter. The results compelled many investors to sell their stock, plunging to its lowest price since 2017.

But overlooked by most, the streaming giant divulged two “golden nuggets” of valuable information: Offering a free ad-supported streaming channel, possibly in the fourth quarter, according to leaked internal memos, and comments from CEO Reed Hastings. Executives told analysts they expect their company to hit an important financial milestone this year, generating consistent positive free cash flow (FCF) for 2022 and beyond.

As unlikely as it might sound now, with the stock down 75% from last year’s highs, those announcements could turn the stock into the kind of holding often prized by long-term investors like Warren Buffett.