The first of the FAANG stocks to report earnings this season reported after-hours on Tuesday. The company’s shares immediately bounced better than 8% higher, and it’s managed to maintain this higher share price in the days since. In today’s blog, I’ll reveal what the good news in this company’s earnings report was and how this high-flyer currently looks from my perspective.
Founded in 1997 and headquartered in Los Gatos, CA, Netflix, Inc. (NFLX) is an internet-streaming service that provides countless movies, television shows and documentaries. All video content can be streamed commercial-free anywhere and anytime of the day through the Netflix app.
The Company operates in three segments: Domestic streaming, International streaming and Domestic DVD. It offers members with the ability to receive TV shows and movies streaming content, including original series, documentaries, and feature films, through a host of Internet-connected screens, such as TVs, digital video players, TV set-top boxes, and mobile devices. The company also provides DVDs-by-mail membership services. It serves approximately 75 million members in 190 countries.
Shares of NFLX bounced more than 8% higher in after-hours trading on Tuesday, following the company’s fourth-quarter report that showed strong subscriber growth during the three-month period. During the fourth quarter, Netflix added 8.33 million subscribers, which topped its forecast for 6.3 million subscribers.
Fourth-quarter earnings per share surged 173.3% year-over-year to $0.41, up from $0.15 per share in the same quarter a year ago. Sales jumped 32.7% year-over-year to $3.29 billion, compared with $2.48 billion in the fourth quarter of 2016. The analyst community was only looking for earnings of $0.41 per share on $3.28 billion in sales, so Netflix posted in-line earnings and a slight sales surprise.
Looking ahead to the first quarter, Netflix expects earnings of $0.63 per share on $3.69 billion in sales. That’s well above the current consensus estimate for earnings of $0.56 per share on $3.49 billion in sales. The company also expects to add 6.35 million subscribers during the quarter.
However, even with this week’s strong bounce, Netflix maintains a C-rating in Portfolio Grader. Part of the reason for this is prior to NFLX earnings report, earnings per share estimates were revised a penny lower during the previous month. For this reason and others, I’m still monitoring NFLX closely, but at the moment, it remains a Hold in my Portfolio Grader system.