Netflix Tumbles after Reporting Mixed Earnings and Revenue

January 17, 2019

By Chloe Aiello

Shares of Netflix tumbled after the market close on Thursday after the streaming giant just missed analyst expectations on revenue, and forecast weaker-than-expected earnings and revenue for the current quarter.

Netflix ($NFLX) reported earnings per share of 30 cents on revenue of $4.19 billion, whereas analysts were expecting earnings of 24 cents per share on $4.21 billion in revenue.

The company was last down about 3 percent after the bell.

Netflix also slightly missed expectations on paid memberships, adding 8.8 million total ー 7.3 million internationally and 1.5 million domestically. Analysts were expecting 7.23 million international adds and 1.77 million domestic. Netflix's outlook for new subscribers in the current quarter is 8.9 million, an 8 percent increase from last year. The company's outlook for first-quarter earnings and revenue also came in weaker than analysts were anticipating.

Netflix also reported that its fourth-quarter operating margin dipped to 5.2 percent from 7.5 percent last year, due to its hefty investment in original content.

Investors were anticipating a very strong quarter from Netflix based on the viral strength of "Bird Box" and Tuesday's announcement that it would raise subscription prices. In its earnings announcement, Netflix estimated 80 million households will view "Bird Box" within its first four weeks.

"It's very interesting that they raised the price for the subscriptions because they were going to miss on subscribers, right, and that's one of the biggest metrics when it comes to Netflix," Optimal Capital's Frances Newton Stacy told Cheddar on Thursday.

The company faces serious competition from the likes of AT&T ($T), Disney ($DIS), and Comcast ($CMCSA), all of which are looking to emulate the streaming giant's success. As these competitors catch up to Netflix in terms of technology, Stacy said a lot is going to depend on original content ー and Netflix is sparing no expense there.

"How much do those competitors actually threaten Netflix? It's going to depend ultimately, I think, on their content, and so obviously they are writing the big checks and making way for the original content because that's the thing that's going to keep them in the game when everyone else catches up with the technology," she said.

Also notable in Netflix's letter to investors were a few different new metrics. The company said it earns about 10 percent of television screen time, which breaks out to about 100 million hours a day to U.S. screens. It also bragged about how it is "transforming the careers of our talent" with a graphic that showed the social media followings of its "Elite" stars before and after the launch of the Spanish show.

"I think Netflix is just saying, 'we're here to stay,' and they are leveraging all of the online social media that goes right along with their customer base. They are going to continue to try to leverage that and grow ahead of these other companies ... by getting as much as possible along those social media platforms," Stacy said.