After the market from a plunge of 10% to up more than 1%! Why do Netflix "come back from the dead"?

It's another US stock earnings season, and the first tech giant to release its results, Netflix, didn't bring any surprises to the market. The market simply followed the trend and "returned a favor for a favor".

After the overnight US stock market closed, Netflix's stock price, which had originally risen slightly, quickly plummeted, falling more than 10% at one point, and then gradually narrowing the decline, even rising more than 1% at one point, and finally closing flat.

Looking back at Netflix last year, this post-earnings drop is reminiscent of "traditional artistry".

Although this time it rose after falling, what does the 12% amplitude indicate?

Is Netflix's earnings report very poor? But why did it "turn around" later?

How bad is the earnings report?

In fact, since last year, it is not uncommon for Netflix's stock price to fall after releasing its earnings report, and the reasons are basically the same, namely that the subscription data and guidance that the streaming media industry values most are not as expected.

It's just that this time, Netflix's situation may be a little worse.

Netflix's latest earnings report shows that first-quarter revenue and new users, second-quarter revenue and profit guidance are all below market expectations. Specifically:

Revenue for the quarter was $8.162 billion, a year-on-year increase of 3.7%, slightly below analysts' expectations of $8.18 billion;

The number of new paying users was 1.75 million, significantly lower than the market's expected 2.41 million;

It is expected that the second-quarter revenue will be $8.242 billion, a year-on-year increase of 3.4%, far below the market's expected growth of 6%;

It is expected that the second-quarter EPS (earnings per share) will decrease by more than 11% year-on-year to $2.84, while the market expects a decrease of less than 4%;

It is expected that the number of new paying users in the second quarter will be roughly the same as in the first quarter.

Therefore, although Netflix's diluted earnings per share this quarter are slightly higher than market expectations after a year-on-year decline of 18%, investors can still see that this is a very bleak earnings report, which cannot be passed off as "voting with their feet".

Who is the lifesaver?

So, why can Netflix recover lost ground after falling below $300 after hours?

This is obviously related to the fact that the company's executives have re-established market confidence on the conference call!

You should know that what the market is most concerned about in this earnings report is the progress of low-priced subscription-supported services with ads and Netflix's efforts to combat account sharing. Investors want to know whether these two major initiatives will affect Netflix's profit margins and more monetization processes.

When interpreting the earnings report, Netflix disclosed that the ad-supported service has achieved initial success, with user engagement exceeding the company's initial expectations, and the ad-supported service has not eroded the premium ad-free version. The average revenue per member that the company obtains from the ad-supported service is even higher than that of the ad-free version. At the same time, Netflix also announced that it will begin cracking down on account sharing in the United States this quarter. "Although this means that some expected growth in new users and revenue will decline in the third quarter, we believe it will bring better results for our users and business."