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Netflix (NFLX), IBM Report Q1 Earnings, Shares Tumble

After the bell Monday as Q1 earnings season begins to hit its stride, Netflix (NFLX) and IBM (IBM) both reported earnings. Both companies beat on the bottom line, but don’t have the spike in after-market trading to go along with it. In fact, NFLX shares have taken a big fall.

Netflix reported 6 cents per share in the Q1 of 2016 on revenues of $1.96 billion. This doubles expectations on the bottom line of 3 cents per share, and also beat the $1.95 billion on the top line. Yet the stock is falling sharply in after-hours trading — down 11.7 percent at this hour — based on lower subscriber growth projections. IBM beat on the bottom line easily: $2.35 vs. $2.09, and revenues also outperformed — $18.7 billion vs. $18.3 billion expected — but guidance stayed flat.

In Netflix’s case, while Q1 subscribers were slightly higher than expected, the increase in subscription fees — including ending the grandfathering of early Netflix subscribers so that they, too, will pay the higher rate of $9.99 per month — has dampened expectations looking forward. In addition, Netflix plans to spend $5 billion in content for fiscal 2016, but $6 billion for next fiscal year.

Finally, competition from companies like Amazon (AMZN) Prime are going to keep Netflix’s feet to the fire on content offering, prices and global reach. Netflix has been a fast-growing stock of late, but currently holds aValue score of F, Growth score of F, Momentum score of A and VGM of F. Tough crowd — all Netflix managed to do was bring in a higher subscriber rate than expected, only to see its stock tank, near term.

IBM, on the other hand, topped on both top and bottom lines — and handily — but shares have also fallen in late trading. A 16.3 percent positive earnings surprise and a 2.2 percent beat on revenues were not enough to buoy shares in late trading. This is directly related to the company’s in-line guidance, which investors expected to rise following such a nice top and bottom beat.

Prior ro the earnings report, IBM held a Value score of A, Growth of C, Momentum of D and overall VGM of B. We shall see if analyst revisions push these values in the coming days following Q1 results.
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