Netflix +11% on Q4 Earnings Miss, Net Adds Up

Mark Vickery
·3 min read

The Dow Jones has snapped a three-day losing streak by Tuesday’s regular trading close, gaining 116 points (+0.38%) on the day. The blue-chip 30 was led by a strong showing from Boeing BA, which announced it will be returning its 737 MAX jet to commercial flights in Canada and the European Union. The S&P 500 and the Nasdaq both closed higher for the first time in three sessions, up 0.81% and 1.53%, respectively — enough for a new record high close for the tech-heavy Nasdaq.

And this comes prior to the Q4 earnings report from Netflix NFLX released after the closing bell, which has sent late-trading for the streaming giant up 11%. This comes on a bottom-line negative surprise for Netflix — its fourth straight earnings miss — to $1.19 per share from the $1.38 expected. Revenues of $6.64 billion in the quarter was only modestly better than the $6.62 billion in the Zacks consensus. So what led to such a big upswing in the after-market?

Try this on for size: Net Adds in the quarter of 8.5 million were 33% higher than the 6.4 million expected. These figures had been softening a bit as the lockdown period of the pandemic waned last summer, but was nevertheless a positive development.

Even soft guidance for net added subscribers in the current quarter, back down to around 6 million, couldn’t quell the bullishness. Netflix’s announcement that it expects to be cash-flow neutral this year and positive every year beyond also brings to mind the good old days when Netflix issued a dividend.

On the conference call, additional questions regarding potential price increases and new content production will likely receive answers. Netflix carried a Zacks Rank #3 (Hold) into the earnings report, with a Value-Growth-Momentum grade of B. The stock is up 164% from this time last year.

On Wednesday, we see another full plate of consequential names from a wide spectrum of industries reporting earnings, including Procter & Gamble PG, Morgan Stanley MS, United Airlines UAL and UnitedHealthcare UNH. As of last week, Zacks Director of Research Sheraz Mian had said Q4 earnings season had gotten off to a great start; we shall see if this continues through this week and beyond.

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