Why Netflix Stock Dropped on Friday

Core Insights - Netflix's stock experienced a decline of 4.5% despite beating earnings expectations, indicating valuation concerns amidst steady growth rates [1][5] - The company reported earnings of $7.19 per share on revenue just under $11.1 billion, surpassing analyst forecasts of $7.06 per share on over $11 billion in revenue [1][3] Financial Performance - Year-over-year sales growth for Q2 was 16%, with an operating profit margin of 34%, an increase of nearly seven percentage points from the previous year [3] - Net earnings improved by 47%, and free cash flow nearly doubled to $2.3 billion, although it fell short of the claimed $3.1 billion in net income [3][4] Strategic Developments - The success of popular streaming series such as Squid Game S3 and the rollout of the Netflix Ads Suite contributed positively to the company's results [4] - Netflix's revenue guidance for the year is projected between $44.8 billion and $45.2 billion, exceeding previous estimates, but operating profit margins may decline to around 30% [4] Market Sentiment - Investors are questioning whether mid-teens earnings growth and relatively weak free cash flow can justify Netflix's high trailing P/E ratio of 60x [5]