After the bell Tuesday, Netflix (NFLX - Analyst Report) and IBM (IBM - Analyst Report) both reported Q4 earnings, and both began trading in opposite directions in the after-market. Netflix posted a big earnings beat of 7 cents per share (the Zacks Consensus Estimate was for 2 cents) on in-line quarterly sales numbers of $1.82 billion. IBM also beat on the bottom line -- $4.84 per share ($4.76 expected) on $22.06 billion in revenues, a smidge lower than expected.
The big story for Netflix in its continuing global growth scenario is its net subscriber adds, and in Q4 Netflix surpassed expectations -- 5.59 million subscribers were added in the quarter, beating the company's earlier guidance of 5.15 million. International net adds reached 4 million -- better than expected -- which covered for a slip in U.S. net adds of 1.56 million, lighter than the 1.62 million anticipated. That said, the company pointed to a 4-5 percent average subscriber revenue increase in the U.S., mostly due to subscribers upgrading to the Ultra HD Plan.
It's the first earnings beat bigger than a penny since this quarter last year, when Netflix surprised 66 percent to the upside. Plus, increased net add guidance for Q1-16 has been raised to 6.1 million globally. And this is despite a suggestion in Netflix's earnings statement that its expansion into China might take slightly longer than expected. This is the first of the FANG (Facebook (FB), Amazon (AMZN), Netflix (NFLX), Google (GOOGL)) stocks to report, and it would appear that although higher penetration in the U.S. is bringing down forecasts for domestic net adds.
Netflix's expansion into India and other well-populated countries has proven a boon both to company gorwth and valuation. Following a 10 percent pop in NFLX share price post-earnings release in late trading, Netflix now trades at 400x forward price-to-earnings. The stock -- even with its patchy, volatile past 6 months, is still up more than 125 percent over the past year and +600 percent in just the past 3 years.
IBM, on the other hand, managed to beat bottom-line expectations, but most segment-by-segment numbers do not appear overly impressive: Services was down 7 percent in the quarter, International Business Services down 10 percent and Software down 11 percent. The good news for Big Blue is that its Strategic Imperative (cloud-based) Services rose 10 percent year over year. Also, it was somewhat expected that IBM, fully ensconced in businesses around the globe, would feel a currency hit due to a strong dollar in Q4.
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