Jim Cramer Says Buy Netflix Stock After Earnings Plunge

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Netflix posted earnings and new subscribers that came in below analysts’ expectations.

The company reported third-quarter revenue of $6.44 billion and earnings of $1.74 per share. Analysts were expecting the company to report revenue of $6.38 billion and earnings of $2.13 per share.

Netflix reported adding 2.2 million paid subscribers in the quarter, which missed its own guidance. The company had earlier projected an increase of 2.5 million new subscribers for the quarter after reporting an increase of 10.1 million subscribers in the June quarter and 15.8 million in the March quarter.

Netflix shares fell 6% on the earnings and subscribers miss after Tuesday's session down 1% to $525.40.

The company said that slowing subscriber growth in the second half of the year is a result of record first-half paid net additions.

For the fourth quarter, Netflix expects to report revenue of $6.57 billion on earnings of $1.35 per share. The company also expects to add 6 million paid net subscribers in the period.

Analysts are expecting the media streaming giant to report revenue of $6.58 billion on earnings of 94 cents per share.

Netflix notes that if it reaches its fourth-quarter subscriber guidance it will have added a record 34 million net subscribers in 2020. Its previous annual high was 28.6 million in 2018.

Netflix generated $1.3 billion from operating activities in the third quarter after losing $502 million a year ago. The free cash flow of $1.1 billion also jumped from a loss of $551 million a year ago. 

The company reported $8.4 billion in cash on its balance sheet with another $750 million in an undrawn credit facility.

Naming Netflix among his "Magnificent 7" stocks, Jim Cramer said Netflix a buy at this level, calling it the "most magnificent" of the group.

Watch more on the Magnificent 7

 

You can follow Jim Cramer and Katherine Ross on Twitter at @JimCramer and @byKatherineRoss. Read more from Katherine Ross here.

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