Third-Quarter Revenue Reaches $12.9 Billion as Forward Guidance Disappoints Wall Street
Streaming giant Netflix reported its latest quarterly earnings numbers last week, and suffice to say, they weren’t good enough to inspire a turnaround in its share price. On Oct. 20, Netflix reported its third-quarter earnings for the period ending Sept. 30, meeting top-line expectations with approximately $12.9 billion in revenue. Earnings per share landed at 87 cents, edging past analyst projections of 82 cents. Despite the solid quarterly performance, the stock suffered a sharp decline due to a lukewarm forward outlook, with full-year revenue projected at $51.1 billion. While this figure marks a 13% year-over-year increase, it sits at the lower bound of the company’s previous range and falls short of Wall Street’s $51.2 billion consensus expectation.
Netflix shares were already struggling heading into the report. The latest numbers triggered further selling.
Valuation Multiples Contrast With Broad Market Averages
The stock is now down roughly 30% since the beginning of the year and has lost more than 40% of its value over the past 12 months. It currently trades around levels not seen in over two years, sitting at a forward price-to-earnings multiple of just 17 based on projected earnings for the year ahead. By comparison, the average stock in the S&P 500 commands a forward P/E multiple of 19. Motley Fool reported that the business remains fundamentally sound despite ongoing challenges in maintaining consumer engagement. Paying a lower multiple for a double-digit grower with strong underlying metrics creates an appealing entry point for patient investors willing to hold through near-term volatility.
No immediate catalyst stands ready to force a rapid reversal. Long-term holders, however, may find value in the compressed valuation.
