Netflix: Still Same, Still Good, but Already Failing to Inspire “Viewers”

Netflix (NFLX) released its Q1 GAAP EPS of $5.28 beating expectations by $0.76. Net income included a $131 million ‘non-cash unrealized gain’ from foreign exchange rate adjustments on their Euro denominated debt. Revenue came in very strong at $9.37 billion (+14.8% YoY) beating forecast by $90 million. Global streaming paid memberships added +9.33 million members to 269.6 million.

Despite its rather strong financial metrics, NFLX stock price reacted negatively. Moreover, Netflix's stock price failed to surpass its previous highs, which is a bad technical sign implying troubles from a technical analysis standpoint. In other words, this could mean a technical correction is coming.

The published earnings may have been based on overly optimistic assumptions allowed by its trial GAAPs. Future growth is unlikely to live up to the expectations strongly suggested by the share price's P/E (price-to-earnings) ratio. Although earnings per share nearly doubled compared to the previous fiscal year, sales, cash flow, and free cash flow were not in line with earnings development. This is an important warning sign for investors. Q2 Guidance: Revenue of $9.49 billion vs. $9.53 billion consensus, EPS of $4.68 vs. $4.55 consensus. Forecast revenue growth of 16% was maintained.