Netflix Drops After Failing to Clear a High Earnings Bar

Netflix (NFLX:US) shares went down on Thursday after the streaming-video company offered a revenue forecast that missed analyst expectations. 

Netflix said it added 5.89 million new subscribers in the second quarter, crushing the expected 2.07 million. North America, Europe, and Latin America, all outperformed expectations.

Still, revenue jumped 2.7% to $8.2 billion, missing the $8.3 billion analyst target. Earnings per share were $3.29 while the operating margin climbed to 22.3%, up from 19.8% for the year-ago period. 

“While we’ve made steady progress this year, we have more work to do to reaccelerate our growth,” the company said in a quarterly letter to shareholders.

“Our goal is to accelerate revenue growth, expand our operating margin and deliver growing positive free cash flow.”

In addition to a revenue miss, Netflix also missed on Q3 sales forecast as it expects to generate $8.5 billion in revenue, below the expected $8.67 billion. The company expects Q3 net additions to be similar to Q2 paid net additions. 

For Evercore ISI analysts, the pullback in Netflix shares is a buying opportunity. 

"We remove our Tactical Underperform on NFLX and would encourage investors to buy NFLX shares on this (small) pullback."

Congressmen Josh Gottheimer was buying NFLX shares in June, a month after Rep. Michael McCaul was selling the stock while it was trading around the $335 mark.

Shares were seen trading just below the $450 handle on Thursday.