Netflix Stock Fell below $500 Mark as Subscribers Growth Disappoints

Netflix stock price lost almost 5% of the value after releasing third-quarter results as its subscriber additions fell below the forecast for 2.5 million growth. Analysts were expecting third-quarter subscribers in the range of 5 million, but actual subscribers came in at only 2.2 million.

This represents a steep drop from subscriber’s growth of 6.8 million in the past year quarter and a 10 million increase in the second quarter this year. The largest streaming company expects fourth-quarter subscriber growth in the range of 6M, which will bring its total subscribers to over 201 million overall – representing a 20.4% year-over-year growth.

Netflix Stock Performance

Netflix stock price slid below the $500 level as investors have started showing concerns over the sustainable growth in subscribers.

Netflix stock price remained the best pick for investors during the pandemic. Netflix stock surged close to 64% so far this year, accelerating the twelve months gains to 90%. The shares of the largest streaming company have recently hit an all-time high of $575.

Earnings and Cash Flows Remained Strong

On the positive side, the company’s strategy of improving its paid memberships is working as paid memberships jumped 25% year over year. Consequently, the streaming giant has generated third-quarter revenue of $6.44 billion, up 23% from the past year period.

The largest streaming company has also enhanced its profitability and cash generation potential. Its operating income grew to $1.315 billion from $980 billion in the earlier year period. The operating margin came in around 20.4% from last year’s 18.7%. Diluted earnings per share rose 18% year over year to $1.74 per share.

The company also claims that they don’t need to look at financial markets for funding; they have substantial cash potential to support investing activities. It has generated $1.3 billion in free cash flows in the latest quarter while cash balance stood around $8.4 billion.

Siraj Sarwar - Lead Analyst
@tradethedayfx
Siraj Sarwar has been performing analysis on the stock market, equity research and general business consultation. He regularly contributes articles on economics, commodities, and equities to the world's leading websites, including Trade the Day, SeekingAlpha, TheStreet, and MSN.
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