Netflix Delivers A Solid Quarter, But The Stock Gets Killed Because Of Bad Guidance

Netflix just reported earnings, and the stock is getting slammed.

This quarter’s results were good: Revenue was in line and EPS beat expectations.

However, Netflix’s Q2 revenue guidance is very light and that seems to be dragging down the stock.

Citi analyst Mark Mahaney tells All Things D the stock is getting body slammed because:

“We believe this is due to concerns over the company’s Domestic Streaming Net Adds outlook – 500K Net Adds in Q2 vs. the Street at 1.2MM. NFLX is, however, laying out an outlook for 7MM Domestic Streaming Adds in 2011. This is higher than our 5MM estimate, and we believe is in-line with or higher than most Street estimates. The issue is market scepticism that NFLX can reach this level given the June Quarter guide.”

CEO Reed Hasting’s letter to shareholders is embedded below and we’re reading it over now.

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Here are the key results versus expectations:

  • Revenue: $870 million versus $869 million expected by the Street
  • EPS: -$0.08 versus -$0.27 expected by the Street
  • Q2 revenue guidance: $820.5 million midpoint versus $897 million midpoint expected by the Street
  • Q2 EPS guidance: $0.02 midpoint versus -$0.17 expected by the Street
  • U.S. Streaming users: 23.41 million versus 22.8 million – 23.6 million subscribers guided by Netflix (via Peter Kafka)

Here is Netflix’s letter to investors:

Investor Letter Q1 2012

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