TLDR
- Netflix stock fell nearly 10% on Friday after missing Q2 guidance expectations
- Full-year revenue outlook of $51.2B came in below Wall Street’s $51.38B forecast
- Founder and board chairman Reed Hastings announced he won’t seek re-election in June
- Morgan Stanley reiterated an Overweight rating and set a $115 price target
- Cathie Wood’s Ark Invest bought the dip, adding to its NFLX position on Friday
Netflix $NFLX tumbled close to 10% on Friday after the company’s Q2 guidance landed below what Wall Street was expecting. The drop wiped out roughly a month of gains and left the stock trading in the $97 range, down 22% over the past six months.
Q1 numbers were actually solid on the surface. Revenue grew 16%, ahead of the 15% Netflix had guided for. Earnings jumped 83% to $5.3 billion, or $1.23 per share, beating both analyst estimates and the company’s own targets.
But the headline numbers had some fine print worth reading.
Revenue growth on a foreign-exchange neutral basis came in at just 14%. And that big earnings beat? It was padded by a $2.8 billion termination fee payment from Warner Bros. Discovery (WBD), which boosted the bottom line after taxes.
Guidance Disappoints
The real damage came from the forward outlook. Netflix did not raise its full-year guidance despite beating Q1 targets and hiking U.S. subscription prices last month.
Its Q2 revenue growth guidance of 13.5% year-over-year would be the slowest top-line gain in the past year. The operating margin target of 31.5% also fell short of Wall Street’s 32% forecast. Full-year revenue guidance of $51.2 billion missed analyst forecasts of $51.38 billion.
Then came the news about Reed Hastings. The Netflix founder and board chairman will not stand for re-election at the company’s June annual shareholder meeting. He stepped back from day-to-day operations previously, but his exit from the board still caught the market’s attention.
Morgan Stanley Stays Bullish
Not everyone hit the sell button. Morgan Stanley reiterated its Overweight rating on NFLX and issued a new price target of $115, implying around 18% upside from Friday’s closing price near $97.
The bank’s analysts described the pullback as a buying opportunity, calling the company’s near-term troubles “lukewarm” and viewing the drop below $100 as a potentially attractive entry point.
Cathie Wood’s Ark Invest agreed. Wood added to Ark’s Netflix position on Friday, her only buy day of the week, picking up the stock on its worst session in recent memory.
Wood’s move fits her usual playbook. Ark often adds to positions on down days rather than chasing momentum.
Netflix’s ad-supported tier continues to grow, and the company expects ad revenue to double in 2026. The platform has posted revenue growth of at least 6% in each of its 24 years as a public company, with double-digit gains in 22 of those years.
Morgan Stanley’s $115 price target remains the most current analyst call on the stock following Friday’s selloff.
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