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Netflix (NFLX) Up in Q4 on Paid Net Adds Growth

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Market indices never got above water during today’s trading session, with the four majors off session lows but tracking downward as of the closing bell. The Dow, which has now given back all of its 2023 gains as of today, sank another -252 points, -0.76%, the identical percentage loss as the S&P 500. The Nasdaq, which is still +4.5% year to date, fell -0.96% by today’s close, while the small-cap Russell 2000, +5% year to date, lost -0.97% today.

Yesterday was the market’s worst day in more than a month, yet instead off ebbing back somewhat, it eroded further for Thursday’s session. Part of this is no doubt due to conscious efforts not to get ahead of the Fed’s decision to escalate interest rates, and to curb enthusiasm on the idea that the Fed may lower the rate hike to 25 bps — what hasn’t changed is whatever level at which the Fed pauses, interest rates are likely to remain there as long as economic reports continue to demonstrate the economy can absorb them.

Netflix (NFLX - Free Report) is the first of the so-called FAANG stocks to report Q4 earnings this season, and shares zoomed +8% initially on the release, despite a big miss on its bottom line: earnings of 12 cents per share was less than 1/3rd the Zacks consensus of 46 cents, and far off the year-ago pace of $1.33 per share. Revenues were exactly in-line with expectations at $7.85 billion in the quarter.

The item that stood out to investors who turned bullish on this stock was in total Paid Net Additions: 7.66 million was well ahead of the 4.57 million the market was expecting, based on the company’s 4.5 million guidance. This likely has something to do with the Ad-Supported Tier (lower-cost streaming service containing commercials), which went live in November of next year. It may also explain at least some of the big miss on the bottom line.

After-market trading of NFLX shares have dwindled to around +4.5% at this hour, as investors prepare to listen in on the conference call. Founder and CEO Reed Hastings is reportedly leaving his co-CEO position, but will retain his Executive Chairman position. His co-CEO, Ted Sarandos, will now be joined by Greg Peters. We expect more details on this decision in the conference call, as well.

Netflix stock is currently +76% off is June ’22 lows (though still less than half its November ’21 highs) and is now +15% over the past five years. Competition from Amazon (AMZN - Free Report) Prime and Disney+ (DIS - Free Report) , among others, has cut into Netflix’s streaming leader position over time. The company plans to crack down on customers sharing their services with others, but as of now Netflix expects only modest positive net adds in Q1.

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