Netflix Inc. shares gave up early gains Wednesday, as investors digested its weaker-than-expected guidance for the second quarter and shrugged off mostly bullish notes from analysts.
The stock NFLX, -1.49% took a dive in after-hours trade Tuesday, falling as much as 5.9%, after the company reported a record number of paying subscribers in the first quarter, but offered guidance for the second quarter that was below expectations.
Ahead of Wednesday’s open, the stock had reversed course to surge 3.3%. It was last down 1.2%.
JPMorgan analysts led by Doug Anmuth said while some were likely disappointed by the guidance, “we think there’s much more to like here than not.”
Analysts cited better-than-expected first-quarter paid net additions of 9.6 million and operating margins of 10.2% that beat the 8.9% consensus on lower-than-expected marketing costs, among other positives. Margins should move higher through 2019, even though some marketing spend has been shifted to later in the year, they wrote in a note to clients.
Netflix guided up its first-half paid net additions to 7% thanks to price increases and it said it expects to attract more new subscribers in 2019 than 2018, they wrote.
The second half will benefit from a strong slate of series and films, including the next series of “Stranger Things,” “Orange is the New Black,” “The Crown”and “Money Heist,” as well as Martin Scorcese’s “The Irishman,” said the note.
The news that more than 52 million subscribers watched “Triple Frontier,” a big-budget action film starring Ben Affleck, in its first four weeks is another positive.
“Importantly, we believe Netflix’s local content continues to travel well, incl. Kingdom, Netflix’s first large scale Korean original,