Netflix shares up on Q2 results: ‘you have to think about buying this stock’

By:
on Jul 19, 2022
Updated: Jul 20, 2022
  • Netflix lost about half as many subscribers in Q2 as it had forecast.
  • Joe Terranova discussed Netflix Q2 results on CNBC's "Closing Bell".
  • Netflix shares are up nearly 10% in after-hours trading on Tuesday.

Shares of Netflix Inc (NASDAQ: NFLX) are up nearly 10% in extended trading after the streaming giant said it did not lose as many subscribers in its fiscal second quarter as it had forecast earlier.

Notable figures in Netflix Q2 results

  • Lost 970,000 paid subscribers versus 2.0 million expected
  • Net earnings printed at $1.6 billion, up 7.0% year-over-year
  • Per-share earnings of $3.20 were ahead of last year’s $2.97
  • Revenue saw an annualised growth of 9.0% to $7.97 billion
  • FactSet consensus was for $2.95 of EPS on $8.03 billion in sales

A day earlier, Netflix said its customers will soon be restricted to use their accounts in one designated home only. For each new home, it’ll charge an additional $2.99. The new policy will apply to Latin America first and will eventually be cloned through the rest of its markets.

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Netflix to win back its lost subscribers

More importantly, Netflix is committed to winning its subscribers back, as per its letter to shareholders. In the current financial quarter, the streaming company hopes to add 1 million paid subscribers and generate $7.84 billion in revenue.

The forecast, however, was still below Street estimates for 1.4 million net additions on $8.09 billion in revenue. Operating margin is expected to stand at 19% to 20% this year.

Joe Terranova reacts to the earnings report

Discussing the earnings report on CNBC’s “Closing Bell: Overtime”, Virtus Investment Partners’ Joe Terranova said:

You have to think about buying this stock. This is not a value trap. It’s a stock that’s exhibiting itself to be a value story, but growth has the potential to return once again. I’d expect it to rally towards $275 in a better market.

According to Netflix, revenue took a $339 million hit on foreign currency impact this quarter. NFLX is currently trading at trailing 12-month price-to-earnings ratio of 18.30.

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