We believe $Netflix(NFLX.US) investors are over-reacting to a rare 3Q earnings miss (-7% pre-mkt), where a one-time Brazilian non-income tax settlement of $619M going back to 2022 marred an otherwise solid quarter and caused NFLX 3Q operating income to come in $400 million below its 3Q forecast and analysts’ estimates. NFLX management said on the conference call that the multiyear tax settlement was a 10% gross tax applied to outbound payments from Brazilian entities to foreign companies, that approximately 20% of the settlement applied to 2025 payments, and that “it didn’t expect this matter to have a material impact on future results.” Normally, investors overlook largely one-time past tax settlements.
NFLX expects to earn $5.45 a share on sales of $12 billion in 4Q, largely in line with Wall Street projections, and plans to use its free cash flow to repurchase shares and invest in programming. Netflix achieved record ad revenue in 3Q and is set to double ad sales in 2025 YoY. The firm doubled its upfront ad commitments for the 2025-26 TV season, and is viewed as having a particularly strong content slate in 4Q. NFLX shares had run up +7% (vs NDX +1%) in the past three weeks in front of expected strong earnings.The copyright of this article belongs to the original author/organization.
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