Netflix (NFLX) stock has been weaker this week after its latest earnings showed a miss on subscriber numbers.
NFLX – Weekly Chart
NFLX has posted a bearish week, but the stock has a clear path for the patient investor in a symmetrical triangle formation. A break below the uptrend line could see lower levels. However, breaching the downtrend would move the stock into a price channel that would trend higher.
Netflix beat analysts’ estimates for the first quarter but also provided a weaker forecast on Tuesday, highlighting its challenges to find growth. The company has embarked on a password-sharing crackdown to squeeze additional revenues for its services. That also came with a cheaper ad-based service to entice password sharers to come on board.
Revenue and earnings for the first quarter came near analysts’ estimates, with earnings per share at $2.88 and revenues of $8.162 billion.
Netflix Reassures Investors of Company Growth
“We are growing and we are profitable,” said Co-Chief Executive Ted Sarandos. “We have a clear path to accelerate growth in both revenue and profit, and we’re executing it.”
Netflix acts as the streaming bellwether, but growth has been building with competition from Disney+. For the latest quarter, Netflix added 1.75 million streaming subscribers, below analyst estimates of 2.06 million additions, disappointing investors still obsessed with streaming service growth.
However, another positive was that the company generated a massive $2.1 billion free cash flow in the first quarter, which went under the radar in its latest earnings. Free cash flow is operating cash flow minus capital expenditures.
From 2015 to 2019, Netflix had a negative cash outflow of $10.5 billion. It turned cash flow positive in 2020 with $1.9 billion in free cash due to a surge in customers during the pandemic. The company then posted $132 million in free cash outflow in 2021, followed by $1.6 billion in free cash flow in 2022.
