Netflix (NFLX) stock is down 10% after the streaming giant issued disappointing guidance and announced that co-founder and current board chair Reed Hastings is stepping down.
The guidance and Hastings departure overshadowed what were strong financial results from the company.
Netflix reported earnings per share (EPS) of $1.23 U.S., which blew past Wall Street’s consensus estimate of $0.76 U.S. The profit nearly doubled from $0.66 U.S. last year.
Revenue in the year’s first quarter totaled $12.25 billion U.S., which topped Wall Street’s expectations for $12.18 billion U.S. Sales were up 16% from a year earlier.
The strong profit figure was helped by a $2.8 billion U.S. breakup fee given to Netflix after the termination of its proposed merger with rival Warner Bros. Discovery (WBD).
Without the breakup fee, Netflix would have earned $0.58 U.S. per share in Q1 of this year.
Management reiterated their previous guidance for the current quarter, which sent the stock down in after hours trading.
However, the company said that it expects operating margins to strengthen in the second half of this year.
Analysts said they were hoping for a stronger outlook from Netflix, especially as the video streamer raised its prices in late March.
The market also doesn’t like that Hastings is leaving Netflix’s board of directors “to focus on his philanthropy and other pursuits.”
Hastings’ departure comes shorty after the company lost out on its attempt to buy Warner Bros. studios and HBO Max to rival Paramount Skydance (PSKY)
Wall Street seems to agree that growing its viewership is key for Netflix, especially as the global economy becomes rocky, risking consumer spending on nonessentials such as entertainment.
Prior to today (April 17), NFLX stock had risen 11% over the last 12 months to trade at $107.79 U.S. per share.
