Netflix shares drop despite impressive Q1 earnings

Streaming video company warns of slowing subscriber growth

Shares of Netflix (NASDAQ: NFLX) hit another all-time high Monday, only to drop more than 5 percent in extended trading after the online streaming video company reported nearly doubling its first-quarter profit.

Netflix announced after Monday's market close a Q1 net income of $60.2 million, or $1.11 a share, 88 percent above the $32.3 million, or 59 cents a share, in the year-ago quarter.

(Also see: Netflix shares soar because some analyst said something)

The company said revenue was $718.6 million, up 46 percent from $493.7 million a year ago.

Despite beating street estimates of $1.07 a share on revenue of $706 million, Netflix saw shares fall to 237.75, or 5.5 percent below Monday's closing price of 251.67.

But in early trading Monday, Netflix shares reached 254.98, a new all-time high. Since March 10, the nadir of a late-winter slump that had some Netflix bears proclaiming that the stock's bubble had popped, shares are up 33 percent through Monday's close.

(Also see: Analyst upgrade boosts Netflix shares -- again)

In a letter to shareholders announcing Q1 results, Netflix said it had 23.6 million members worldwide through March 31 (the end of the first quarter), up 69 percent from a year ago.

However, what may have given Wall Street pause was the company's warning of slower growth:

Looking forward, our prior period comps for net adds are going to get tougher, and while we expect our net adds the rest of this year to continue to exceed those of the prior year, it won’t be at a pace of nearly 2X like in Q1.

Netflix has been transitioning its business model away from mailing DVDs to subscribers to streaming video content to their homes. The reduction in DVD shipment costs helped the company increase its operating margin in the U.S. to 16 percent from 14 percent in last year's first quarter. Ninety-seven percent of Netflix subscribers are in the U.S.

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