Four times per year, earnings season gives investors new data about a company’s operations. It’s one of the best times to see shares make a big move—in either direction.
But sometimes some funny things happen. Like a company reports a great quarter but shares fall instead of rise. That may be because investors got hyped in advance and sent shares higher than they should have gone in the first place. Or it may be because of some key detail that came out during the earnings report that gave investors pause.
Whatever the case may be, many big growth names have seen it happen. They report solid earnings, solid revenues, and otherwise show growth—but often investors will get hung up on one metric more than others.
That’s been the case with Netflix (NFLX) this earnings season. The company is growing revenues by over 25 percent per year, but investors tend to only care about the company’s total subscribers. With the company “only” growing subscribers by 2.5 million against an expected 5 million, it certainly appears as though it isn’t doing well. But what other industry would see an additional 2.5 million customers in the span of 90 days as a bad thing?
Netflix is working on building a long-term brand, and the company’s big successes in movies and television shows in the most recent quarter show that they’re moving beyond simply being a source of content from other media companies.
That longer-term trend will likely reward shareholders better than following the exact number of subscribers. After all, it’s not enough to build a big customer base. Subscribers have to be kept! That’s where Netflix is performing better than other companies in the industry right now, and where there will likely be long-term value.
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