Netflix (NFLX 347.25, -5.94, -1.68%) traded lower in pre-market action after the company's soft financial results were offset by strong subscriber metrics.
Fourth quarter EPS came in above guidance and estimates, but revenue came in just below its forecast.
However, Netflix added 8.84 mln subs during the quarter, above its 7.6 mln forecast.
Looking out to the first quarter, EPS and revenue guidance was below consensus, but the company guided for 8.9 mln paid sub additions, which would equate to sub growth of 25% to over 148 mln.
Netflix added 29 mln subs in 2018 versus 22 mln in 2017. Earnings grew 114%, but FCF went the wrong way by ~50% to negative $3 bln.
The company reaffirmed operating margin (+13%) and FCF guidance (-$3 bln) for 2019, calling for improved FCF thereafter.
The streaming giant also confirmed price increases in the U.S. in 1H19. Price lifts, which have raised the cost of the company’s popular Standard plan to $13/month from $11/month, on services have now been implemented for new members in the U.S. and will be phased in for existing subscribers during the coming quarters.
Netflix highlighted its strong production slate and the success of the company’s original content with both films and series, noting that it earns 10% of television screen time in the U.S. The company said that video games and YouTube offer more competition than any other streaming service, including Amazon Prime, Hulu, or HBO. The platform also continues to invest in international productions and reported strong viewership and social engagement with series recently launched from Spain, Italy, and Turkey, among others.
The stock is trading lower in response to results, which does not come as a surprise given the elevated expectations into the print. The stock had risen more than 50% in three weeks after hitting an 11-month low following the market carnage in late December.
The options market was pricing in an ~8% move for the session following the release. The stock is seeing a relatively muted decline in the face of mixed results. Soft financial results but strong operating metrics give both the bulls and bears something to chew on. The stock may find support if it retests support at the 200-day moving average near $334/share.
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