Netflix shares have taken a beating since last night’s disappointment on domestic subscriber numbers, even though analysts generally think management had a good excuse. The stock was down 8.18% at $101.21 per share shortly before 2 p.m. Eastern today.

Netflix, Inc. (NFLX): Analysts Buy Mgmt's Excuse

Today analysts are weighing in on last night’s earnings report, and most agree that the weakness presents a buying opportunity for investors.

Netflix base numbers miss guidance

Netflix posted revenue of $1.74 billion and earnings of 7 cents per share, missing management’s guidance and also consensus estimates. The company also missed on U.S. subscriber numbers but over-delivered on international subscribers. Paid international adds amounted to 2.74 million, beating guidance of 2.4 million and the consensus estimate of 2.46 million. U.S. subscriber adds missed guidance, coming in at 880,000 compared to guidance of 1.15 million and significantly missing the consensus estimate of 1.19 million.

Management guided for net U.S. adds of 1.65 million (compared to the consensus estimate of 1.73 million) and international adds of 3.5 million (compared to the consensus estimate of 3.17 million) in the fourth quarter. They project earnings of 2 cents per share in the fourth quarter.

Chip-based cards blamed for Netflix’s miss

Netflix management said the big reason for their miss in the area of domestic subscribers is because of the ongoing transition to chip-based credit and debit cards. They said the higher than usual churn rate was caused by involuntary cancellations due to Netflix’s inability to charge subscribers’ cards.

Overall, analysts seem to think the transition to chip-based cards is a good excuse. FBR & Co. analyst Barton Crockett and team initially were skeptical about the claim but later decided that it appears “credible” and “plausible.” Banks have been trying to get customers over to chip-based cards by Oct. 1, but the FBR team said that thus far, they have only managed to switch about a third of their customers.

Credit Suisse cuts Netflix’s price target

Credit Suisse analyst Stephen Ju and his team also cut their price target for Netflix in the wake of last night’s earnings report. They’re Neutral-rated on Netflix, and their new target is $124 per share, down from $130 per share previously. This price target combined with the Neutral rating is rather interesting, particularly because firms like Baird have an Outperform rating and a similar price target ($128 per share). Cantor Fitzgerald has a Buy rating and a price target that’s only $1 higher than that of Credit Suisse.

They said they remain on the sidelines based on valuation, although they will be reviewing three factors to see if a change is warranted. One is faster than expected realization of target operating margins, the second is acceleration of consumer adoption, and the third is moderation of content spend.

Raymond James cuts price target

Raymond James analyst Justin Patterson also reduced his price target, pushing it from $140 to $130 per share but maintaining his Outperform rating on Netflix. He called the third quarter report “noisy” but added that his long term view hasn’t changed.

He noted that the company’s U.S. contribution margin continues to expand while international subscriber growth remains strong and interest in the company’s original content remains high. Further, he agrees with most analysts in saying that Netflix has solid pricing power in light of the recent increase in the monthly subscription fee for one of its plans.

He appears to agree with FBR analysts in that Netflix’s excuse about the transition to new credit and debit cards with chip technology is credible.

Piper Jaffray ups price target

Interestingly, Piper Jaffray analyst Michael Olson lifted his price target for Netflix from $96 to $109 per share, although he remains Neutral-rated on Netflix. He was the only analyst (of those whose reports we reviewed) to increase his price target following last night’s report.

His long term view of Netflix is positive but thinks there will be more attractive entry points, which is why he maintained his Neutral rating. He expects that overall, Netflix shares will be heading upward but that near term volatility will continue and that there will be “periodic pullbacks.”

What else Netflix needs

BMO Capital Markets analyst Daniel Salmon has a Market Perform rating and $115 per share price target on Netflix and sees a few other things the company must do. He expects the streaming video provider to be able to keep attracting new subscribers even though it recently announced another price increase. Among the factors he sees helping this are more “must-see” original content like Narcos, the film deal with Disney, which moves online next year, and more investment in original feature films.

The analyst will be watching to see if Netflix is helped further by its addition of new genres like news and weekly talk shows. He also wants to see how the company will be impacted if Apple announced a competing service as it has been rumored to be working on for some time.