Netflix reported its first decline in U.S. subscribers in more than eight years yesterday, losing 126,000 subscribers while analysts were expecting an increase of 350,000. The stock tanked by more than 10 percent today.
The miss freaked out Netflix investors, lopping $17 billion off Netflix’s still-insane valuation of $141 billion. That translates to a loss of $135,000 per lost domestic subscriber.
Netflix admitted its missed forecast was reflected in all of its regions, but areas that recently experienced price increases saw “slightly” more cancellations.
Back in January, The Diffusion Group released a survey saying that a $1 price increase would cause 8 percent of subscribers to cancel the service while another 8 percent would downgrade to a lower tier.
If this comes to pass, Netflix would lose 4.8 million subscribers, generating a $62.4 million annual revenue loss. More to the point, it would serve as proof that there is a finite limit to the number of streaming services a given U.S. household will maintain at any one time.
Analyst Thinks Netflix Valuation is ‘Bullsh*t’
Michael Nathanson of MoffettNathanson expressed his position very clearly regarding Netflix’s earnings:
“To be clear, we think 10 to 15 year DCF [discounted cash flow] models are interesting, but bullsh*t, and used by the sell side to defend a stock that they want to champion.”
Nathanson had modeled 88 million subscribers by 2025, but last quarter may have changed everything:
“[Looking] at this quarter’s results, that ‘blue sky’ scenario looks downright psychedelic as [the second quarter’s] U.S. subscriber adds turned negative on the back of $1 to $2 price hikes and an underwhelming content slate.