Netflix, Inc. Shares Take a Tumble After Disappointing Q3

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Netflix, Inc. (NASDAQ:NFLX) is an American Internet subscription service for movies and television shows that, over the past few years, has grown into the world’s leading Internet television network with over 53 million members in more than 50 countries. Customers pay a monthly fee to watch unlimited TV shows and movies available online without any commercial interruptions. Netflix shares dropped over 26% to $332 on Wednesday night after the company revealed its third quarter earnings report. Despite meeting its Q3 revenue expectations and barely beating its bottom line, the Internet subscription service also reported less new subscriber additions than it had originally predicted.

During its Q3 results, Netflix reported $0.96 earnings per share, beating analysts’ consensus estimate of $0.93 by $0.03. During the same quarter last year, the company posted $0.52 earnings per share. The company earned revenue of $1.22 billion for the quarter compared to the consensus estimate of $1.41 billion. The Internet subscriptions service’s quarterly revenue was up 10.6% on a year-over-year basis. On average, analysts expect that Netflix will post $3.81 earnings per share for the current fiscal year.

Netflix, Inc. (NASDAQ:NFLX) claimed that the price hike in its service resulted in having less-than-predicted new subscriber additions in its third quarter. The company also believes it over-forecast for the quarter, thus taking a tole on additional subscriptions. Netflix stated in its report, “In hindsight, we believe that late Q2 and early Q3 the impact of higher prices appeared to be offset for about two months by the large positive reception to Season Two of Orange is the New Black. We remain happy with the price changes and growth in revenue and will continue to improve our service, with better content, better streaming and better choosing. The effect of slightly higher prices is factored into our Q4 forecast. “

Shares of Netflix opened at $332.85 on Thursday, October 16th. The company has a 1-year high of $489.29 and a 1-year low of $299.50. The stocks daily moving average is $348.59 and has a 50-day moving average of $457.67. The market cap for Netflix, Inc. (NASDAQ:NFLX) is $21.73 billion and its P/E ratio is 108.46.

On October 16th, RBC Capital analyst Mark Mahaney reiterated an Outperform rating on Netflix but cut his price target from $600 to $550. He reasoned, “We’re Buyers of this 26% after-market correction. Yes, the results and the guide were disappointing, but not THAT disappointing. We had expected Domestic Sub Net Adds to begin declining in ’15. Our timing may have been 6 months off, but we still believe NFLX reaches 50MM U.S. Subs in 2017. And the company still has plenty of Content, Marketing, and Market Expansion levers to achieve Global Sub levels nicely in excess of 100MM long-term.” Mahaney is currently ranked #4 out of 3357 analysts on TipRanks, earning a 62% success rate recommending stocks and a 26.1% average return per recommendation. He has also rated Netflix, Inc. (NASDAQ:NFLX) 27 times earning a 64% success rate recommending the stock.

Separately on October 16th, FBR Capital analyst Barton Crockett reiterated a Market Perform rating on Netflix and cut his price target from $440 to $425. He noted, “Estimates will come down. But the price volatility, we believe, speaks more to high expectations inherent in this kind of high- multiple Internet stock than to a crack in the fundamental story.” Crockett currently has a 47% success rate recommending stocks, earning a +4.8% average return per recommendation. He has also rated Netflix 17 times, earning a 75% success rate recommending the stock.


On the other hand, on October 16th, Wedbush analyst Michael Pachter maintained an Underperform rating on Netflix with a $245 price target following the company’s disappointing Q3 results. Pachter pointed out that this is the first time since 2012 that Netflix reported negative free cash flow and that “the delta between net income and free cash flow continues to grow.” Pachter currently has a 42% success rate recommending stocks, earning a -3.0% average return per recommendation. He has also rated Netflix, Inc. (NASDAQ:NFLX) 34 times, earning a 39% success rate recommending the stock.


To see more recommendations for Netlix, visit TipRanks today!

Carly Forster writes about stock market news. She can be reached at [email protected]

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