Internet television network Netflix (NFLX) late Thursday crushed Wall Street’s targets for the first quarter but missed views with its sales outlook. Netflix stock fell in extended trading.
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The Los Gatos, Calif.-based company added 9.33 million subscribers in the March quarter. Analysts polled by FactSet had expected 5.48 million new subscribers. Netflix ended the first quarter with 269.6 million total subscribers worldwide.
Netflix earned $5.28 a share on sales of $9.37 billion in Q1. Analysts had modeled earnings of $4.52 a share on sales of $9.28 billion. On a year-over-year basis, Netflix earnings jumped 83% while sales climbed 15%.
Netflix’s Q1 report marked the company’s third straight quarter of accelerating sales growth.
Netflix Stock Slides On Sales Guidance
For the current quarter, Netflix forecast earnings of $4.68 a share on sales of $9.49 billion. Wall Street was looking for earnings of $4.54 a share on sales of $9.52 billion in the second quarter. Netflix’s guidance would translate to year-over-year growth of 42% in earnings and 16% in sales.
In after-hours trading on the stock market today, Netflix stock fell more than 3% to 589. During the regular session Thursday, Netflix stock dipped 0.4% to close at 611.15.
Heading into the earnings report, Netflix stock had been trending sideways for the past two months.
Netflix Focused On Increasing Profits
In a letter to shareholders, Netflix management noted the company’s improved profitability. Netflix’s operating profit margin rose to 28.1% in the first quarter, vs. 21% in the year-earlier period.
For the full year, Netflix increased its targeted operating margin to 25% from 24%. The company’s operating margin was 21% in 2023 and 18% in 2022.
“We have built a hard-to-replicate combination of a strong (content) slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix,” the letter said. “Improvement in these key areas is the best way to delight our members and continue to grow our business.”
Popular original TV series on Netflix in the first quarter included “3 Body Problem,” “Avatar: The Last Airbender” and “The Gentlemen.” Major original movies on the service included “Damsel,” “Rebel Moon — Part One: A Child of Fire” and “Society of the Snow.”
In other news, Netflix reportedly is changing its movie production strategy, by shifting its focus away from big-name-led, high-budget action movies toward more diverse offerings, the New York Times reported. Netflix also is looking to cut costs with the strategy change.
Netflix stock is on three IBD stock lists: IBD 50, Big Cap 20 and Stock Spotlight.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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