A month has gone by since the last earnings report for Netflix (NFLX Quick QuoteNFLX - Free Report) . Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Netflix due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Netflix Q1 Earnings Beat, User Growth Misses Estimates

Netflix reported first-quarter 2021 earnings of $3.75 per share, beating the Zacks Consensus Estimate by 25.8% and the company’s guidance of $2.97. Moreover, the figure surged 138.9% year over year.

Revenues of $7.16 billion increased 24.2% year over year and also beat the consensus mark by 0.4%. Average revenue per membership increased 6% year over year on a reported basis (5% on foreign-exchange neutral basis).

The streaming giant added 3.98 million paid subscribers globally against addition of 15.77 million in the year-ago quarter and missed its guidance of 6 million paid-subscriber addition.

At the end of the first quarter, Netflix had 207.64 million paid subscribers globally, up 13.6% year over year, missing management’s expectation of 209.66 million paid subscribers.

The miss reflects growing competition from services launched by Apple, Disney, ViacomCBS, AT&T, Discovery and Comcast. However, the year-over-year growth benefited from solid content portfolio.

Notably, the company now expects paid net additions to be 1 million compared with the year-ago quarter’s 10.09 million, reflecting stiff competition.

Segmental Revenue Details

United States and Canada (UCAN) reported revenues of $3.17 billion, which rose 17.3% year over year and accounted for 44.3% of total revenues. ARPU grew 9% from the year-ago quarter on a foreign-exchange neutral basis.

Paid-subscriber base increased 6.3% from the year-ago quarter to 74.38 million. The company added 0.45 million paid subscribers, down 80.5% year over year.

Europe, Middle East & Africa (EMEA) reported revenues of $2.34 billion, which surged 36% year over year and accounted for 32.7% of total revenues. ARPU grew 4% from the year-ago quarter on a foreign-exchange neutral basis.

Paid-subscriber base increased 16.7% from the year-ago quarter to 68.51 million. The company added 1.81 million paid subscribers, down 74% year over year.

Latin America’s (LATAM) revenues of $837 million increased 5.5% year over year, contributing 11.7% of total revenues. ARPU grew 4% from the year-ago quarter on a foreign-exchange neutral basis.

Paid-subscriber base rose 10.4% from the year-ago quarter to 37.89 million. The company added 0.36 million paid subscribers, down87.6% year over year.

Asia Pacific’s (APAC) revenues of $762 million soared 57.4% year over year and accounted for 10.6% of total revenues. ARPU increased 3% year over year on a foreign-exchange neutral basis.

Paid-subscriber base jumped 35.3% from the year-ago quarter to 26.85 million. The company added 1.36 million paid subscribers, down 62.2% year over year.

Content Details

Netflix’s first-quarter content slate included Firefly Lane, Lupin, Fate: The Winx Saga, Ginny & Georgia, season 3 of Cobra Kai, Below Zero, Space Sweepers, Squared Love and Who Killed Sara?.

Movies included I Care ALot, YES DAY, Outside the Wire, and the last installment of To All the Boys I’ve Loved Before.

Markedly, Netflix plans to spend more than $17 billion in cash on content this year. The company also plans to launch more originals compared to 2020.

Netflix has a strong content portfolio for the second half of 2021 that includes Sex Education, The Witcher, La Casa de Papel (aka Money Heist) and You. Original movies include The Kissing Booth finale, Red Notice, Don’t Look Up and Too Hot to Handle.

Operating Details

Marketing expenses declined 13.2% year over year to $762.6 million. As a percentage of revenues, marketing expenses decreased 460 basis points (bps) to 11.5%.

Moreover, consolidated operating income surged 108.1% year over year to $954.3 million, driven by higher-than-expected revenue and subscriber growth. Consolidated operating margin expanded 600 bps on a year-over-year basis to 14.4%.

Balance Sheet & Free Cash Flow

Netflix had $8.40 billion of cash and cash equivalents as of Mar 31, 2021, compared with $8.21 billion as of Dec 31, 2020.

Long-term debt was $14.86 billion as of Mar 31, 2021, up from $15.8 billion as of Dec 31, 2020. Streaming content obligations were $20.73 billion compared with $19.22 billion as of Dec 31, 2020.

Netflix reported free cash flow of $691.7 million against free cash outflow of $284 million in the year-ago quarter.

Guidance

For the second quarter of 2021, Netflix forecasts earnings of $3.16 per share.

Netflix expects to end the second quarter of 2021 with 208.64 million paid subscribers globally, indicating growth of 8.1% from the year-ago quarter.

Total revenues are anticipated to be $7.30 billion, suggesting growth of 18.8% year over year.

Operating margin is projected at 25.5% compared with 22.1% in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 21.07% due to these changes.

VGM Scores

Currently, Netflix has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Netflix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.