Why Wall Street is balking at Netflix's decision to stop sharing subscriber data

• Netflix stock plunged as much as 9% after reporting its first-quarter earnings results.
• While the streaming giant crushed Wall Street estimates, it made the decision to stop sharing subscriber growth data.
• The decision "invites worry about the outlook for subscriber growth in '25 and beyond," Pivotal Research said.

Netflix crushed Wall Street estimates on Thursday when it reported its first-quarter earnings results, but investors remained unconvinced.

Shares fell as much as 9% on Friday as investors focused not on the positives from the quarter, but instead on the announcement that Netflix would stop sharing subscriber growth data beginning in 2025. The decision is worrying some who are interpreting the decision as a signal the company is bracing for limited growth in future subscriber additions.

"We view the lack of visibility into these key KPIs as a contributor to the negative after-market stock reaction," Bank of America said. "While still early, the potential concern is subscriber growth had significantly decelerated in 2022 (prior to the implementation of paid sharing), and this could be a harbinger of decelerating subscriber growth in the future."

Here are the key results:

• Revenue: $9.37 billion, versus analyst estimates of $9.28 billion
• Earnings per share: $5.28, versus analyst estimates of $4.52
• Subscriber adds: 9.3 million, versus analyst estimates of 5 million

Netflix also increased its second-quarter revenue and profit guidance. A continued crackdown on password sharing and Netflix's growing advertising business drove the positive results.

The decision to stop sharing subscription numbers "invites worry about the outlook for subscriber growth in '25 and beyond," Pivotal Research analyst Jeffrey Wlodarczak said in a note on Thursday.

But he's not worried at all, and is instead enthusiastic about the results and likened Netflix's subscriber data decision to Apple's decision in 2018 to stop reporting iPhone unit growth.

"We remind investors that AAPL stop disclosing iPhone unit growth in 4Q 2018 and after a short period of stock consolidation the stock materially outperformed the market and we believe while '25+ subscriber growth will slow we still see a long runway for subscriber/ARPU growth going forward," Wlodarczak said.

Wlodarczak raised his Netflix price target to $800, representing potential upside of 41% from current level. That's also the highest price target on Wall Street for Netflix.

"Our view remains unchanged that Netflix has clearly won the streaming wars as evidenced by yet another strong across the board beat and raised guidance, especially relative to its streaming peers, and this is what, in our view, winning looks like," Wlodarczak said.

The key for Netflix going forward is to use its scale to "keep the flywheel going," Wlodarczak said, that way the company can get more leverage over its competitors and content creators, as well as improve its product for consumers.

Netflix stock slightly pared some of its losses on Friday, falling 8.3% as of 11:53 a.m. in New York.