It was a tale of two stories for Netflix according to Wall Street analysts. While the company posted first-quarter revenue that beat estimates, it also warned that it expected light second-quarter guidance.
Shares of the streaming giant plunged 9 percent in extended hours trading after the report but by Wednesday morning had pared those losses to just over 1 percent.
In a letter to investors, CEO Reed Hastings said the U.S. price increase contributed to churn, or customer turnover. Hastings also said he wasn’t concerned about rivals’ new streaming services.
Worries about churn are overblown according to analysts at UBS. “Chill about Netflix churn fears,” analyst Eric Sheridan said.
“We see NFLX as a top pick as it capitalizes on the opportunity to be the global leader in streaming media & the competitive moat around its business widens (via a mix of content spend, marketing, & scale),” Sheridan added.
“NFLX’s first quarter earnings may be controversial to some — mostly because of the light second quarter [subscription] outlook — but we think there’s much more to like here than not,” J.P. Morgan analyst Doug Anmuth said in a note to clients after the report. “We continue to believe that Disney+ will not be a major threat to NFLX subscriber numbers given NFLX’s quality & quantity of content, & that Netflix/Disney+ will not be an either/or decision.”
There’s still room for shares to go higher, Goldman Sachs analyst Heath Terry said.
“As Netflix’s content investments, distribution partnerships and marketing spend drive subscriber growth significantly above consensus expectations and the company approaches an inflection point in cash profitability, we believe shares of NFLX will continue to significantly outperform,” he said.
The reaction from analysts at Credit Suisse was a bit more subdued.
“Overall, while not the net add beat many were hoping for, we believe outlook commentary was quite bullish, especially record first half paid net additions in the face of record price increases, revenue growth accelerating the next few quarters., and a very strong second half content slate,” analyst Doug Mitchelson said.
Here’s what else analysts think of Netflix’s earnings report: