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Netflix stock drops after earnings miss estimate. Why some are blaming Elon Musk for the plunge
Netflix shares fell nearly 7% on Tuesday after the company missed its third-quarter earnings estimate.
Netflix shares fell nearly 7% on Tuesday after the company missed its third-quarter earnings estimate. Netflix (NFLX) missed analyst expectations on both revenue and profit. The streaming giant cited an ongoing dispute with Brazilian tax authorities as a reason for the miss.
Netflix revenue and earnings
Netflix reported a revenue of $11.51 billion. According to a Yahoo Finance report, it fell short of Bloomberg consensus estimates of $11.52 billion and the company’s own estimate of $11.53 billion.
Earnings per share came in at $5.87, which is more than the $5.40 that Netflix reported a year ago. However, it missed analyst expectations of $6.94.
Who is to blame for Netflix stock dropping?
Netflix reported an operating margin of 28%, lower than its forecast of 31.5%, because of an unexpected expense related to a tax dispute in Brazil. The company said that without this one-time charge, it would have exceeded its target and doesn’t expect the issue to affect future results.
The expense came from a 10% tax on certain payments made by Netflix’s Brazilian units to its overseas operations. Netflix decided to record the charge in the third quarter after it became likely that it would lose a legal case over the tax, the company’s executives said.
“It’s not a tax that’s specific to Netflix. It’s not even specific to streaming,” Chief Financial Officer Spence Neumann said on the company’s earnings call, as per a CNBC report. “Absent this expense, we would have exceeded our Q325 operating income and operating margin forecast, and we don’t expect this matter to have a have a material impact on our results going.”
Elon Musk to blame?
Some social media users also theorized that Elon Musk’s criticism of Netflix’s woke content could have played a role in the streamer missing earnings estimates.
“Musk says "Cancel $NFLX", company misses earnings with all sorts of reasons. Hmmmmm.... Too bad they stopped disclosing subscribers, as you'd think that would be good management?” wrote one X user.
At the beginning of the month, Tesla billionaire Elon Musk had led the ‘cancel Netflix’ movement. Accusing Netflix director Hamish Steele mocked the killing of Charlie Kirk, Musk said he had cancelled his own Netflix subscription.
