Those investors who drove the price of Netflix shares down 1.7% on Tuesday before the streaming video giant released its third quarter figures are looking like a bunch of dunces as they missed a major spike in the price after the company produced much better than expected figures.
Netflix shares had been one of the strongest performing S&P500 stocks in the third quarter and that performance had continued on into October and ahead of the third quarter results release.
And yet on a day when Wall Street kicked higher for a second day in a row, some investors turned negative on Netflix and sold them off – the buyers will be happy they bought.
Analysts had forecast the company would add subscribers this quarter, not lose them as it had done in the first half of 2022 – the forecast was around 1.09 million, which is close to what Netflix forecast a quarter ago.
Netflix topped that with a rise of 2.41 million, including 1.3 million in Asia and 100,000 in North America where it had been losing eyeballs. Netflix now has a total of 223.1 million subscribers around the world.
As well, Netflix forecast it would add 4.5 million new subscribers this quarter which is when it also starts its new $US6.99 a month ad-supported stream in 16 countries in November.
That was an eye-opener for many investors as some had thought the take up of the new ad backed stream would be much slower.
As soon as investors saw those figures in the after the close release, they chased Netflix shares 14% higher in afterhours trading, pointing to a strong start when the session resumes on Wednesday.
But there were other surprises in the result – revenue was $US7.93 billion against forecasts for $US7.83 billion. Net income was just on $US1.4 billion, up slightly on forecasts but around $US50 million less than reported for the third quarter of 2021.
Starting next quarter, Netflix will no longer provide guidance for its paid memberships, but will continue to report those numbers during its quarterly earnings release.
Netflix forecast it would add 4.5 million subscribers during its fiscal first quarter and said it expects revenue of $7.8 billion, which will be down largely due to currency pressures overseas from the strength of the greenback.
The streamer said it was “very optimistic” about its new advertising business. While it doesn’t expect the new tier will add a material contribution to is fourth-quarter results, it foresees membership growing gradually over time. says its Its current forecast for subscriber growth is based on its upcoming content slate and the typical seasonality that comes during the last three months of the year.
Netflix said that its revenue line in its report would become the top metric for the market to focus on.
