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Jim Cramer: Should You Sell Shares After a Company Announces Weak Guidance?

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Netflix (NFLX) - Get Netflix Inc. Report announced weak guidance when it released earnings Tuesday after the bell.

The company said it added 9.6 million paid streaming subscribers in the first quarter, beating guidance of 8.9 million, but its outlook for the second quarter disappointed.

First-quarter earnings of 76 cents a share rose from year-earlier profit of 64 cents. Revenue jumped to $4.5 billion from $3.7 billion a year earlier.

Analysts were forecasting earnings of 58 cents a share on revenue of $4.5 billion.

Netflix said it expects to add 5 million paid subscribers in the second quarter, an 8% decline from a year earlier, with 300,000 new subscribers in the U.S. and 4.7 million new subscribers internationally. Analysts were calling for 5.5 million paid new subscribers. In addition, Netflix said its expects revenue in the quarter of $4.93 billion, slightly below consensus, while earnings were forecast at 55 cents a share, well below expectations of 99 cents.

The company said it expects to see "some modest short-term churn effect as members consent" to the company's recently announced price changes. While U.S. net adds were seemingly unaffected by the change, the international market may be less forgiving.

To combat this, the company said it was "looking forward to a strong slate of global content in the second half of the year."

Jim Cramer weighs in on whether or not investors should sell stock after a company announces weak guidance. 

Related. Jim Cramer: Netflix Is a Necessary Bargain

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