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Netflix Beats Expectations and The Street Is Not Impressed

Daniel Laboe

Netflix NFLX illustrated a strong top and bottom-line beat in its Q4 results, more than doubled EPS estimates. The streaming giant added 8.76 million new subscribers this past quarter beating expectations by more than a million.

Despite the positive Q4 results, NFLX traded down over 1.5% in initial after-hours trading then came back marginally.

Why didn’t this beat lead to an immediate share price surge?

Management’s forward guidance for Q1 subscription growth illustrated deceleration. It would be the first quarter with year-over-year subscription growth below 20%.

The streaming space is saturating fast, with new options continuing to flood the industry. Disney DIS and Apple AAPL just released streaming service, while Comcast CMCSA and AT&T T prepare to release theirs in the spring.

Netflix is priced at a premium to other offerings and investors are concerned that this will inhibit growth as lower costs services gain market share. Netflix needs to ensure it continues to produce quality content to remain a streaming necessity.

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