Netflix (NFLX) and Intuitive Surgical (ISRG) Report
Shares of Netflix (NFLX) are trading down this morning after the company beat Q1 expectations. Revenue grew 15.2% to $9.4 billion (beating by 1.3%, or $125.2 million) while EPS grew 83.3% to $5.28 (beating by 16.7%, or $0.76). Net streaming additions was 9.3 million, way ahead of expectations.
So what gives? Forward guidance wasn’t amazing. While management said Q2 earnings should be above expectations, full-year revenue guidance is a little short and paid net additions in Q2 is expected to be lower than in Q1. Also, in a surprise move, management said they’ll no longer share subscriber numbers, stoking further concern about a pending slowdown.
Analysts had mostly positive views on the quarter, though some differences of opinion on the end of subscriber number sharing. Some pointed out that Apple (AAPL) pulled a similar move when the company stopped reporting iPhone unit sales. Also, there’s been discussion about how Netflix cares more about revenue, engagement, cash flow and margins than subscriber numbers. The advertising tier still isn’t expected to be a major contributor this year, but is expected to become more meaningful in 2025.
Down roughly 7% this morning isn’t the reaction I was hoping for. Our half-sized position is now back to about break even. I’m going to move the stock to hold and give it a few hours to see how it acts. Nothing here changes the big-picture story as Netflix is still the dominator in streaming, so we may easily see buyers stepping in on this weakness. HOLD
Intuitive Surgical (ISRG) beat Q1 expectations as revenue grew 11.5% to $1.89 billion ($20.4 million beat) and EPS of $1.50 beat by $0.08. Procedure volume was up 16% versus consensus of just 13.7%, and the company placed 313 da Vinci systems, 14 more than expected, including eight of the new da Vinci 5 (DV5) systems.
Importantly, management raised procedure growth expectations for the year from a range of 13% to 16% to a range of 14% to 17%. There are some supply constraints still, so a full-scale launch of DV5 won’t be until early next year, but all signs point to a solid soft launch of the platform. Most (but not all) analysts are raising estimates and price targets. We’re sticking with a buy rating. BUY HALF
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