Netflix just released their earnings report and it ain’t good. But is there a silver lining?

Netflix completely tanked earlier this week when they released their earnings report and announced that for the first time they lost subscribers. They didn’t say growth is slowing, they said they are shrinking. Not good.

We are coming out of the pandemic which was obviously a boon to streaming and similar activities or forms or entertainment. In hindsight, this should not have been a surprise. This is still a market leader in a profitable industry.

For years, it has been a running joke that millions of people share Netflix passwords. Management has ignored this, probably since they were seeing massive growth without addressing it, so why bother. It is too early to say for sure, but has management been saving this arrow in their quiver just for this day? They alluded that a crackdown is coming on password sharing.

The fundamentals are not bad at all. They have some debt on their balance sheet but that is not uncommon for these types of companies, plus content production is expensive and they have great cash flow.

On the call, they said they may add advertising revenue streams to their business model. Right now their only revenue is subscribers. They are looking at additional revenue streams such as perhaps a whole new ad supported membership, coupled with the password crackdown and the fact they are clearly an industry leader. With a small N “netflix” is almost a generic word for streaming. This stock, if you scale into it slowly, could be a superb long term investment and this crash is a great opportunity.