Netflix Just Crashes 20% After Q4 Earnings, Should You Sell Or Buy The Dip?

Netflix share crashes 20% in after-hours trading when they announced their Q4 earnings. The share price dropped from an all-time high of $700.99 to $407.79.

Here are some key numbers of the earning call:

  • Earnings per share (EPS): $1.33 vs 82 cents expected in a survey of analysts.
  • Revenue: $7.71 billion vs $7.71 billion expected.
  • Global paid net subscriber additions: 8.28 million vs 8.19 million expected,

Netflix added 8.28 million global paid net subscribers in the fourth quarter. Analysts had expected the company to add 8.19 million. But that’s fewer than the 8.5 million subscribers Netflix added in Q4 2020, the same figure it had forecasted for Q4 2021, and its guidance for Q1 2022 was worse. Netflix said it expects to add 2.5 million subscribers during the first quarter of 2022, far below the 3.98 million it added in Q1 2021, while analysts had expected 6.93 million in the first quarter of 2022.

A more detailed analysis of the Q4 finances can be found in this video:

My Thoughts
I personally hold 8 x Netflix LEAPS contracts that are expiring in Jan 2024 and they cost me a total of more than $11,000. I remembered last year in Q2, Netflix’s stock took a tumble due to weak guidance and increased competition from Disney+. But things quickly changed in Q3 when they had the phenomenal show, Squid Game, and the stock went to an all-time high.

I believe that there is still room to grow for Netflix, especially in the Asian market where Netflix will continue to produce blockbuster serials like Squid Game. I like the idea of Netflix producing their own series like Mondy Heist, Squid Game and recently, The Silent Sea. While that will give them increased operating expenses, it also means they have exclusive rights to these shows. It is also from these shows that viewers choose to subscribe to Netflix as they can’t view it elsewhere.

I will adopt a wait-and-see approach for Netflix and if the share price continues to dip, I will add on my Jan 24 Netflix LEAPS to average down my cost per contract.

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Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:

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If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

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My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021

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I Cut $135,715 Worth Of Losses In The Last 1.5 Months


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