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Netflix (NFLX) Beats, but Misses on Subscriber Adds

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Market indexes continue their sluggish performance for a second day this Tuesday, while earnings reports accelerate somewhat in the second week of “Q1 earnings season.” We’re not seeing big drops that would send the Volatility Index into a new orbit, but we’re still seeing the worst performance on the Dow and S&P 500 for about 4 weeks, down 0.75% and 0.68%, respectively. The Nasdaq fell 0.92% on the day, while the small-cap Russell 200 took in on the chin again, -1.89%.

Netflix (NFLX - Free Report) , a Zacks Rank #3 (Hold) stock with a Value - Growth - Momentum score of F ahead of its Q1 earnings report this afternoon, beat estimates on its bottom line but is selling off in late trading due to weak Paid Net Adds in the quarter. Earnings of $3.75 per share easily swept past the $2.98 in the Zacks consensus and more than double the $1.57 posted in the year-ago quarter. Revenues came in slightly ahead of estimates to $7.16 billion in the quarter, up nearly 25% from a year ago.

Clearly, the excellent performance in subscriber adds in 2020 during peak pandemic months pulled forward lots of what might have been expected in the quarter just reported: 3.98 million net adds in Q1 were far below the 6.43 million anticipated. But this guess was based on earlier quarters’ gratuitous fortunes. The company now expects “just” 1 million new subscribers in Q2, way down from the 4 million analysts had been projecting. In 2020, Netflix brought in 20 million new paid net adds.

Netflix shares dropped 10% on the news right away, and fell as far as 12%+ minutes after the release. This takes the stock into negative territory year to date, after gaining nearly 27% throughout 2020. Average Revenue per Membership grew 6% on price hikes in Q1. A recalibration is clearly in order for Reed Hastings & Co., which no doubt will be addressed in its upcoming conference call.

Railway major CSX Corp. (CSX - Free Report) missed earnings estimates by 2 cents to 93 cents per share, with revenues coming exactly in-line with the Zacks consensus of $2.81 billion. This is only the third earnings miss in the past year for the company, though the second in the last four quarters. Shares are down roughly 2.75% on the earnings news, and still up nearly 10% year to date — more than 60% from the year-ago share price.

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