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The number of titles could have been problematic for Netflix (NASDAQ: NFLX) bulls. The world's first premium video service recorded exceptional results in the first quarter, but the initial enthusiasm abated after the market came up to first-quarter streaming streaming In progress.
Netflix expects earnings of $ 0.55 per share for the second quarter, well below net earnings of $ 0.85 last year and $ 0.99 per share that Wall Street professionals were targeting. . Netflix, which hopes to close the new quarter with 5 million global net additions in streaming, also did not meet the targets set by analysts and its results the previous year. Despite the gloomy gloom of its short-term prospects, Netflix shares opened a little higher Wednesday and, although they spend the first hours to go up and down, they certainly did not craze like bears. Let's go over the reasons why Netflix has held up well despite its mixed results.
Source of the image: Netflix.
1. Taxes Matter
Net income is expected to fall sharply in the second quarter, but this is not a problem that will continue. Accounting elements based on isolated one-off events push the projected effective tax rate to 48% in the second quarter.
Ignore the inflated taxes for the current quarter, and Netflix was not better on the other fronts, higher in the income statement. This represents a record operating profit of $ 616 million thanks to its highest operating margin of the previous years. In short, there is a big asterisk next to the $ 0.55 per share that Netflix expects for the second quarter.
2. You can do more with less
Net additions of 5 million streaming subscribers worldwide would be the smallest increase since the first quarter of 2017, but there is still a lot to do here. This may be the lowest user gain in two years, but Netflix is pushing its rates higher in the US and several other key markets.
We are not talking here about an insignificant slowdown, corrected for inflation. Prices in the US are up 13% to 18% this month for existing subscribers, which will boost average revenue per user – a measure that fizzled out when Netflix embarks on smaller global markets. Unlike the first quarter, in which subscriber gains over the past year outpaced revenue growth, this will be the opposite in the second quarter.
It should also be noted that the second quarter is a seasonal sleep period for Netflix. Combining the first two quarters to smooth the numbers with a broader data network, Netflix is targeting 14.6 million net streamed additions in the first half of 2019, compared with 13.7 million in the first half of the year. Last year.
3. Netflix stagnates since last quarterly report
Sometimes you'll see an action sell after a mixed quarter after a monster rally, but that's not where Netflix is. Netflix is part of S & P 500The best performers in recent years, but he has been lagging behind in the last three months. Stocks are about where they were when Netflix announced its first quarter financial results three months ago.
Momentum investors may not appreciate the calm before the storm of results, but it's easier for them to appreciate the nuances of a solid quarterly exit. Netflix continues to be the leading player in a burgeoning niche, and the market does not long ignore this type of placement in pole position. Netflix shares are not cheap, but according to most accounts, it's worth it.
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