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Netflix Stock Price Slides After Earnings, S&P 500 Sentiment Dented

Netflix Stock Price Slides After Earnings, S&P 500 Sentiment Dented

Peter Hanks, Strategist

Netflix Stock Price Talking Points:

  • Netflix’s miss may prove troublesome for S&P 500 sentiment as the stock often serves as a bellwether for the tech sector
  • IBM also missed analyst’s expectations, but pared losses as the after-hours session progressed
  • Interested in stock market sentiment? See how IG Clients are positioned on the S&P 500 with Retail Sentiment Data and sign up for one of our Sentiment Walkthrough Webinars to learn more about the tool

Netflix Stock Price Slides After Earnings, S&P 500 Sentiment Dented

Netflix (NFLX) released first quarter earnings after the close Tuesday, beating analyst expectations on both revenue and earnings per share. As the report was digested further however, future cash flow related to subscriber growth concerned investors and the stock traded nearly 8% lower immediately after release. As the after-hours session unfolded, Netflix shares recovered – down about 1.5% at the time of this article’s publication.

Netflix Stock Price After Earnings

netflix stock price after earnings

Netflix’s reported first quarter revenue was $4.52 billion, equating to $0.76 earnings per share – notably higher than the expected $0.58. Still, the strong financials were not enough to outweigh the troublesome outlook for subscriber growth. While the streaming service added an impressive 9.6 million subscribers in the most recent quarter, second quarter additions were forecasted at only 5 million – beneath Street expectations of 6.09 million. Worrisome subscriber forecasts coincide with a new entrant to the streaming space – Disney. The impact of heightened competition will likely be of headline concern in future releases.

Alongside Netflix, International Business Machines Corporation (IBM) reported first quarter earnings but failed to meet revenue guidance and subsequently slipped in after-hours trading. Like Netflix, the stock pared initial losses as the report disseminated throughout the market.

Netflix stock price

Option traders anticipated notable volatility from both Netflix and IBM – something not uncommon for the former. That said, NFLX and IBM look to trade within the expected price range heading into Wednesday’s session. In the coming weeks however, Netflix’s implied volatility will remain heightened. As the first FAANG member to report earnings, the stock is often looked to as a bellwether for tech sentiment and a barometer for general equity sentiment. Once other tech stocks report, Netflix will likely find itself tied to the performance of the sector.

With the conclusion of bank earnings on Wednesday, tech will take the stage as the next key industry to watch as the season progresses. In the social media space, Twitter and Snapchat report next Tuesday. Following their reports, Facebook and Microsoft will report after next Wednesday’s close. Follow @PeterHanksFX on Twitter for earnings season coverage. In the interim, the S&P 500 and Dow Jones will look to Chinese GDP – due to be released early Wednesday.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: Dow Jones, S&P 500, DAX 30, and FTSE 100 Technical Forecast

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