Here's Why Netflix Tanked
Estimize | Oct 16, 2014 03:09AM ET
Netflix (NASDAQ:NFLX) just reported earnings for its 3rd quarter of the year. The streaming video company reported profits of 96 cents per share, surpassing the low bar set by Wall Street but failing to live up to investor expectations (98 cents) as represented by the Estimize consensus.
More troubling, however, was the forecast that management provided for next quarter. The graph above shows how management has a clear history of sandbagging its guidance numbers, but today’s announcement was still a rude awakening for investors.
Contributors on Estimize were expecting 4th quarter earnings per share to come in around $1.09, Netflix just said that number might be more like 44 cents. Of course, you shouldn’t take management’s word at face value, most companies set guidance low on purpose so they will have an easier bar to jump over. Even still, this guidance number is causing a lot of pain to shareholders. At the time of this post Netflix is down 26% in after hours trading.
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