Netflix Reports Mixed Earnings

American media services provider and production company Netflix, Inc. (Ticker Symbol: NFLXWealth Strength IndexAAPL is Extremely Up and trending Up) reported earnings and revenue after the close on Wednesday. The streaming services giant reported an earnings per share beat of $1.47 vs. Wall Street analysts’ expectations of $1.04 per share. Netflix reported a slight miss on revenue reporting $5.24 billion vs. Wall Street analysts’ expectations of $5.25 billion.

Netflix’s domestic paid subscriber additions were a large disappointment for the quarter coming in at 517,000 vs. 802,000 that the street’s analysts’ were expecting. However, the company’s international paid subscriber additions came in much better than expected at 6.26 million vs. Wall Street analysts’ expectations of 6.05 million.

Netflix updated its guidance for the next quarter and the company now expects to report earnings of .52 cents per share and revenue of $5.4 billion. The Los Gatos, Calif.-based company is now projecting 7.6 million global net subscriber additions for the next quarter, which was less than the 8.8 million it achieved in the same quarter last year, due to increased competition in the streaming sector.

The above image is a chart of Netflix’s stock price over roughly the past five years. The stock started off trading in 2015 positively.  Netflix found some resistance right around the $124 dollar level and spent the next 18 months trading within a horizontal channel. Horizontal channels are usually viewed as continuation patterns and are areas of indecisiveness between buyers and sellers. The stock is a point at which supply and demand are relatively balanced and a stock’s price trades within a certain range. Usually, the same highs and lows are tested multiple times within the horizontal channel before a break out in either direction.

Netflix broke out from its channel in the first quarter of 2017.  The stock proceeded to rally, led by continuous positive earnings and guidance reports, over 200% over the next 18 months to trade to an all-time high of $423.21 on June 21st, 2018.  Unfortunately for shareholders the stock began selloff, giving back nearly 50% of its previous rally over the next two quarters.  The stock found some footing at its 100-week moving average near the beginning of 2019.  Currently, Netflix is positive for the year but is trading below its 100- and 200-day moving averages.

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

Based on a survey of 33 analysts offering 12-month price targets, the average price target for Netflix’s stock is $380.93.  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 $292.35.

Even with the new entrants into the streaming services and content space such as Disney+, Apple TV+, and HBO Max, to name a few, Netflix is still seeing good results out of its content.  Netflix’s original series, “Stranger Things” had 64 million accounts watching the third season in the first four weeks.

Investors in Netflix should look to their next earnings report on january 24th for fresh news within the company.

 


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