Why are Netflix Shares in a Slump Despite Beating Revenue Forecasts? Here’s Why

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Netflix share prices are trading at 488.95 at premarket, which is a full $9 below yesterday’s closing price as the market continues to respond to the latest Netflix earnings report. Why is the Netflix share price trending downwards despite an increase in revenue and operating income?

Netflix reported its Q3 earnings yesterday, and this revealed that revenues were at $6.44 billion, with earnings of $1.74 per share. These numbers show that revenue was higher than the expected figure of $6.33 billion but far short of the consensus figure of $2.13 in earnings per share. Furthermore, the company failed to onboard new customers in sufficient numbers, attaining only 2.2 million new customers as opposed to the 3.3 million additions expected by the markets. 

The company had in the 2nd quarter, expected to add 2.5 million new customers, resulting in a miss. Investors were therefore not pleased that the company had a drop in profitability and new customer additions, prompting the selloff seen in the stock. Netflix plunged 6.92% on Wednesday and is already 0.21% lower on Thursday in premarket trading. 

Technical Outlook for Netflix

Netflix share price now shows a conspicuous triple top pattern on the daily chart, with the neckline situated at the 466.94 support. However, the immediate support is seen at 480.06, which is where the lows of 30 July, 17 August and 10 September are found. Sellers need to drive prices below this support for Netflix share price to push towards the 466.94 support level (neckline of triple top), with 458.37 constituting a further downside target. The price projection from the neckline break is at the 28 April/5 June lows of 403.39, with 383.50 lining up as a further downside target if decline continues beyond the price projection of the measured move from the pattern’s neckline.

On the flip side, if bulls attempt a recovery, then this recovery move would have to break the 501.25 resistance to make a move to cover the downside gap. 520.41 is a future target for buyers and attainment of this level is what closes the downside gap of Wednesday 21 October.

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Netflix Daily Chart

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