Netflix (NASDAQ: NFLX) announced positive fourth-quarter earnings after the closing bell Thursday. Despite better-than-expected results, shares tumbled over 20% during after-hours trading, following the decrease in subscriber growth.
The American subscription service and production company reported earnings of USD1.33, compared to the expected USD0.82 a share. Revenue amounted to USD7.71 Billion, exactly what analysts anticipated. Furthermore, global net subscriber growth was 8.28 million, higher than StreetAccount estimates of 8.19 million.
“Our prior view assumed that as content investments rebounded post-pandemic, net additions would as well,” Swinburne explained. “We now assume a base case of continued content spending growth but a more muted net adds outlook, lowering our earnings outlook materially,” wrote Morgan Stanley analyst Benjamin Swinburne.
Netflix revealed expectations to add 2.5 million subscribers in the first quarter, lower than the 3.98 million during the first quarter of last year. Following the news, Macquarie Research’s Tim Nollen shifted from “neutral” to “underperform” and lowered his price target from USD615 to USD395.
“Fourth-quarter results came in better than market fears and in line with management guidance in terms of revenue and sub adds and then better-than-expected in terms of profitability,” he argued. “THE issue is the first-quarter sub-adds guide of 2.5 million, which was less than half of our/Street expectations, and easily the weakest first-quarter sub-adds guidance in many years,” Evercore ISI analyst Mark Mahaney reported.