We believe $Netflix(NFLX.US) investors are over-reacting to a rare 3Q earnings miss (-7% pre-mkt), where a one-time Brazilian sales tax settlement of $619M going back to 2022 marred an otherwise solid quarter and caused NFLX 3Q operating income to come in $400 million below its 3Q forecast and analysts’ estimates. NFLX management said on the conference call it didn’t expect this matter to have a material impact on future results. Normally, investors overlook largely one-time past tax settlements.
NFLX expects to earn $5.45 a share on sales of $12 billion in 4Q, largely in line with Wall Street projections, and plans to use its free cash flow to repurchase shares and invest in programming. NFLX shares had run up +7% (vs NDX +1%) in the past three weeks in front of expected strong earnings.
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