Market Analysis

Netflix share price pressured after weaker than expected Q2 guidance

Netflix’s share price is coming under pressure after the streaming TV giant announced weaker-than-expected earnings guidance for the second fiscal quarter of this year. Netflix did, however, post better than expected first-quarter earnings, beating wall street’s expectation on both the top and bottom-line.

Netflix posted revenue of $4.52 billion during the first fiscal quarter, which was better than the forecast of $4.50 billion. Earnings per share also rose to $0.76 cents during the first quarter, which easily beating most analysts predictions of $0.57 cents per share.

A key metric that analysts use when looking at streaming TV services is domestic paid subscriber additions and also international paid subscriber services. Netflix again beat market expectations, with domestic paid subscriber increasing to 1.74 million against forecasts of 1.61 million.

International paid subscriber additions rose to 7.86 million, against forecasts of 7.31 million, while the companies revenue rose over twenty percent on a year-on-year comparison basis. Further bullish news came from Netflix company officials, who said they expect new TV streaming services from Disney and Apple will only have a limited effect on its growth projections.

Investors choose to focus on the weaker-than-expected second fiscal quarter revenue guidance, with Netflix announcing a major downgrading of revenue. The company said second-quarter revenue per share is likely to be $0.55 cents per share, which was much weaker than the expected $0.99 cents per share.

Investors appeared concerned about the earnings downgrade, especially since Netflix recently introduced an increase to its subscription pricing model. Netflix also expected its cash reserve would be weaker than previous quarters as the company spends cash on new content and real estate.


Netflix Inc Daily Mountain Chart                                               Source- Activtrader Platform

Netflix Inc Daily Mountain Chart | Source: ActivTrader 


Technically, Netflix is starting to appear weak, with the daily time frame chart showing a bearish head and shoulders pattern. The neckline of the bearish pattern is also located close to the stocks 200-day moving average. If sellers move price below the 200-day a further decline towards the $300.00 level should be expected.


Written by Nathan Batchelor, External Analyst

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