Netflix blew away its guidance and analysts' estimates on paid new subscribers for the first quarter on Tuesday after-hours.
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Shares rose as much as 10% before moderating to a slight loss following Netflix's first-quarter earnings release, which showed paid net subscribers of 15.77 million for the quarter. Netflix's (NFLX) - Get Report revenue and earnings came in at $5.77 billion and $1.57 per share, while analysts polled by FactSet had been expecting earnings of $1.64 per share on revenue of $5.75 billion.
On new subscribers -- the metric that tends to influence Netflix stock moves the most -- analysts were expecting 8.2 million net paid subscribers for the quarter. Netflix's guidance, issued before the coronavirus pandemic, was just 7 million. Expectations have been running high for Netflix, however, with its stock recently reaching new all-time highs.
For the current quarter, Netflix is guiding for 7.5 million new paying subscribers, well above a consensus of 4.14 million, and revenue of $6.05 billion (+23% year-over-year) and GAAP earnings of $1.81, both above estimates of $5.98 billion and $1.55.
"Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast," Netflix wrote in its quarterly letter to shareholders. "We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon."
Netflix has been among the top-performing tech stocks during the coronavirus pandemic, with shares up almost 33% year to date.
Streaming services have reported a surge in interest during the coronavirus pandemic, but analysts have been mixed on the benefits to Netflix specifically.
Bernstein analyst Todd Juenger argued in an April 1 note that the pandemic will accelerate the widespread adoption of streaming video and that Netflix's content pipeline will encourage more subscriber additions and less customer churn. Juenger raised his price target on Netflix shares to $487 from $423.
Meanwhile, Benchmark analysts initiated coverage of Netflix with an immediate sell rating on shares with a price target of $327, roughly 25% below their current value. Benchmark's Matthew Harrigan wrote that Netflix's stock is too expensive at current levels with the price grounded more in perception than reality.
"Our cautious view is based on our belief that the shares already reflect a 'lazy long' halo from the perception of a COVID-19 safe haven," Harrigan wrote, adding mounting competition and potentially constrained pricing power for Netflix doesn't bode well for the firm's earnings longer term.