Netflix (NFLX) made $3.66 billion in three months. That's about 44% more profit than a year earlier. Its stock still fell about 6% in after-hours trading on Tuesday, Oct. 20. The trouble was growth. Revenue rose 12% to $12.9 billion, the slowest pace in three years.
The report capped a rough week. Netflix had cut about 6% of its staff, around 1,000 jobs. Its content chief and its film boss are out, too. The new content head is Peter Rice, who held top entertainment jobs at Disney and 21st Century Fox. Netflix tried and failed last year to buy Warner Bros. Discovery's studios and HBO Max. Doubts about its growth have hung over the stock since then. It's down more than 40% over the past year, the Journal's Jessica Toonkel reported.
Then the outlook slipped. Netflix now expects $51.1 billion of revenue this year, up 13%. That's a bit below the middle of the 13% to 14% range it gave before. Ads are part of the trim. Some ad products are rolling out slower than planned. So Netflix now sees $2.7 billion in ad revenue this year, down from the roughly $3 billion it had projected.
Fewer hours, same bill
Here's the odd part. Netflix keeps its customers better than any rival. Only about 2% cancelled in September, according to the research firm Antenna. Yet Americans are spending less time watching it, the Journal has reported. That matters. People who watch a lot are happy, and happy customers stick around through price hikes. Co-CEO Ted Sarandos said about 95% of the programming budget goes to TV shows and movies. “The core is our critical growth engine,” he said.
The stock kept sliding on Wednesday, Oct. 21. It closed at $65.04, a new 52-week low. It bounced $2.01 to $67.05 on Thursday, Oct. 22. Netflix isn't held in any of our books.
Our read
This is Investments/Risk, IN04, with a Cash Flow note. A company can grow profit 44% and still let investors down. The price had faster growth built into it, and growth slowed. That's the risk in paying up for a growth story. The business can make more money while the stock goes down. From here we'd watch two numbers, time spent watching and ad revenue.
Your connection is the streaming line on your card statement. Few people cancel Netflix, Antenna's numbers show, even as Americans watch it less. This week, open last month's statement and list every streaming charge with its price. Next to each one, write the last show you watched on it. A blank line marks a charge to cancel. Most services let you rejoin later if you miss one. A small monthly charge is easy to forget, and that's how it adds up over a year. You clear the gutters in October, before the leaves pile up. If you'd like to fold the subscriptions into a bigger budget check, bring the list to your next review.