Netflix Reports Disappointing Quarterly Figures

Netflix (Ticker Symbol: NFLXWealth Strength IndexAAPL is Extremely Up and trending Up) reported disappointing quarterly figures at the close on Wednesday.  The media services and content provider reported an earnings per share beat of .60 cents per share vs. Wall Street analysts’ expectations of .56 cents per share.  Netflix reported a slight revenue miss of $4.92 billion vs. $4.93 billion that Wall Street analysts’ were expecting. Paid subscriber additions were the biggest disappointment for shareholders last week.  Domestically, Netflix had a loss of 126,00 subscribers vs. a gain of 352,000. Internationally, paid additions also fell short with a gain of 2.83 million vs. analysts’ expectations of a gain of 4.81 million.  

Netflix is looking out to its third-quarter earnings results on the heels of strong ratings from the third season of its popular original show “Stranger Things.” For the upcoming quarter, Netflix has forecasted 7 million additional global paid subscribers and revenue guidance of $5.25 billion. Netflix has two additional original shows that will be airing in the third quarter of this year.  The final season of its popular original series “Orange Is the New Black” and a new season of “The Crown” are set to air this fall and both are expected to boost subscriber numbers.  

Above is the past two and a half years of Netflix’s stock price.  The stock had a slow but positive start to 2017, grinding higher, led by multiple earnings day surprises that kept the stock moving in a positive direction. The stock found support multiple times at its 50-day Moving Average throughout 2017.  At the beginning of 2018, the stock gapped up on a solid earnings call and proceeded to continue higher for the next six months rallying over 100% to trade to an all-time on June 21st, 2018 at $423.21.  

Netflix began to find some resistance around the $420.00 price level while forming a Double Top reversal pattern in the second quarter of 2018.  A Double Top occurs when the price of an asset reaches a high price, has a small pullback, then retests that high failing to break above it. The pattern is confirmed once it breaks below the low between the two prior highs. The stock proceeded to sell off over the next two quarters into the end of 2018.   Netflix had a good start to the year in 2019 and the stock was up over 35% at its peak this year. The stock gapped lower on its earnings report on the open Thursday and is currently trading below its 50 and 200-Day Moving Averages.  

(Chart above courtesy of ​www.tipranks.com​) 

Based on a survey of 9 analysts offering 12-month price targets, the average price target for Netflix’s stock is $412.22.  According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $315.10.  

Netflix will soon be losing two of its most-watched shows “The Office,” and “Friends.”  The company recently spent upwards of $80 million dollars maintain the streaming rights to “Friends” until 2020. Netflix stated that the loss of the shows will free up capital for the company to invest in making more original content.  Investors in the streaming content space should look to Amazon’s (Ticker Symbol: AMZNWealth Strength IndexAAPL is Extremely Up and trending Up) earnings release on July 24th for fresh news within the sector.  

 


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