Netflix is getting destroyed after earnings

Netflix has reported third-quarter earnings and it’s a miss.

Earnings per share came in at $US0.07 on revenue of $US1.74 billion, missing expectations.

Following these results, shares were down as much as 14%.

But during the company’s earnings webcast, shares rallied with Netflix off just about 1% near 5:35 p.m. ET.

Wall Street was looking for the company to report adjusted earnings per share of $US0.12 on revenue of $US1.75 billion, according to estimates from Bloomberg.

On the user side, Netflix added 880,000 members in the US, below Wall Street’s expectations that the company would add 1.25 million users. In the same quarter last year the company added 980,000 domestic users.

Netflix said in its earnings release that, “Our over-forecast in the US for Q3 was due to slightly higher-than-expected involuntary churn (inability to collect), which we believe was driven in part by the ongoing transition to chip-based credit and debit cards.”

International streaming ads came in at 2.74 million, beating expectations to add 2.45 million users during the quarter. In the second quarter, the company added 3.3 million subscribers.

In the fourth quarter, Netflix expects to add 1.65 million users in the US, below expectations for 1.81 million ahead of the report. The company expects earnings per share to come in at $US0.02 in the fourth quarter.

Free cash flow in the third quarter was negative $US252 million, down from negative $US229 million in the second quarter, with the company citing increased investments in original content.

Shares of Netflix were up about 125% this year as of Wednesday’s close.

In a note to clients ahead of the report, analysts at Bespoke said that the stock has declined at least 9% in each of its last four October earnings reports, including a 19% decline in 2014 and a 35% decline in 2011.

And with Wednesday’s results and post-report performance, make that five in a row.

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