Netflix shares sink even after positive results – 07/20/2023 – Market

Netflix shares collapsed this Thursday (20) on Nasdaq, the American stock exchange that gathers shares of technology companies. The fall occurs one day after the company has presented positive results for the second quarter of this year.

Close to 1:20 pm, the company’s shares fell 9.10%, to US$ 434.14, in the biggest drop since April last year. In the year, the paper accumulates high of more than 46%.

From April to June of this year, Netflix increased its subscriber base by 5.9 million, well above Reuters’ consensus estimate of 1.9 million.

The company also reported revenue of US$ 8.2 billion, up 2.7% compared to the same quarter of 2022.

According to Netflix, the result was influenced by the launch of paid password sharing in more than 100 countries, which represent about 80% of the company’s revenue base.

“Revenue in each region is now higher than pre-launch, with enrollments already outpacing cancellations,” the company said in a statement to shareholders.

Netflix’s operating profit (before tax and interest) was $1.8 billion, up 15.8% from the same period last year.

Net earnings per share were $3.29, up from $3.20 in the second quarter of 2022.

Even with the company’s strong numbers, praised by analysts, the company’s revenue was slightly below the $ 8.3 billion expected by Wall Street, according to Reuters consensus.

In addition, as it is a technology company, analysts look closely at the company’s projections for the coming quarters. The company’s estimate of third-quarter revenue was $8.5 billion, below consensus forecasts of $8.7 billion.

OPTIMIST BANKS

Despite negative market reactions, analysts at major foreign banks are optimistic about Netflix’s numbers.

In a report, Eric Sheridan, Lane Czura and Alex Vegliante of Goldman Sachs say Netflix’s results and projections should bring the company back to an annualized net subscriber addition rate of more than 20 million.

According to analysts, this rate points to greater confidence in the company’s goals in the medium term, which should lead the company back to double-digit revenue, with margin expansion.

Going forward, Goldman Sachs expects discussions around the relationship between the company’s high share price and revenue growth rates and margin dynamics this year.

Analysts Doug Anmuth and Bryan M. Smilek, from JPMorgan, in turn, say that the results of the second quarter do not change the positive thesis that the bank has for the action of Netflix.

The American bank recognizes that the company’s monetization by implementing paid password sharing is below expectations by the institution’s analysts, even so, they expect the measure to be highly aggregating for the company’s revenue over time.

JPMorgan experts call attention to the fact that the strategy is being successful, with fewer cancellations in response to the measure than expected.

The bank also highlights the significant increase in Netflix’s projection for free cash flow, from US$ 3.5 billion to US$ 5 billion in 2023.

According to analysts, this improvement in the estimate is also related to lower costs due to the writers’ and actors’ strike in the United States.

Finally, Bank of America classified the company’s numbers as “healthy”, and said that they indicate that the launch of paid password sharing is being very positive for the company.

The bank acknowledged, however, that Netflix’s revenue in the second quarter was well below that projected by the institution’s analysts, who expected revenue growth of 4.9%. They also highlighted the decline in average revenue per subscriber.