Why Netflix Stock Was Slumping Today

Core Viewpoint - Despite a solid third-quarter earnings report, Netflix shares declined due to a Brazilian tax issue and the stock's premium valuation, resulting in a 10% drop in stock price [1][7]. Financial Performance - Netflix reported a revenue increase of 17.2% to $11.51 billion, meeting analyst expectations, with growth across all four regions [3]. - The adjusted operating margin was 31.5%, but it dropped to 28% after accounting for the Brazilian tax dispute expense [5]. - Reported earnings per share (EPS) rose from $5.40 to $5.87, but fell short of estimates at $6.97 [5]. Advertising Business - The company achieved its best ad sales quarter ever and doubled commitments in U.S. upfronts, indicating that the advertising business is becoming a significant growth driver [4]. Future Outlook - For the fourth quarter, Netflix anticipates revenue growth of 16.7% to $11.96 billion and expects EPS of $5.45, which aligns favorably with consensus estimates [6]. Analyst Sentiment - Wall Street analysts encouraged investors to buy the dip, noting that there are no fundamental issues with the results and highlighting the long-term growth potential, particularly from the advertising business [7].