Netflix new subscriber growth comes in way below guidance, shares drop 10%


Netflix Inc (NASDAQ: NFLX) announced its second-quarter earnings Wednesday evening after the closing bell. Shares of the streaming giant tumbled more than 11% in after-hours trading after the company said it had global net additions of 2.7 million, missing its 5 million forecast.

The Los Gatos, California-based company’s second quarter net income surpassed expectations of Wall Street analysts, though revenue fell short.

Netflix stock, which is up 20% year-to-date, ended the regular session with a loss of $3.55, or 0.97% to $362.44. As of 4:09 p.m. ET the stock was down 11.45% to $321.00.

NFLX Earnings & Outlook

Netflix had second-quarter earnings of $0.6 per share, versus earnings of $384 million, or $0.85 per share, in the same period last year. Analysts surveyed by Refinitiv expected earnings of $0.56 per share in the quarter.

Revenue came to $4.92 billion in the three months ended June 30, compared with revenue of $3.91 billion in earlier-year quarter period. On average, analysts polled by Refinitiv had forecast revenue of $4.93 billion in Q2 2019. Netflix had posted earnings of $0.76 per share on revenue of $4.52 billion in the first quarter of this year.

Netflix ended the quarter with 151.56 million international streamers as consumers around the world continued to move from linear TV to internet entertainment. For the current quarter, the company expects to grow by 7 million paid memberships, more than the 6.1 million in the third-quarter of the previous year.

Netflix Executive Comments

“Our missed forecast was across all regions, but slightly more so in regions with price increases. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region). Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated,” Netflix executives said in a letter to shareholders.

“Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized. In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well,” the executives added.

Netflix Inc Profile

Netflix’s primary business is a streaming video on demand service now available in almost every country worldwide except China. Netflix delivers original and third-party digital video content to PCs, Internet-connected TVs, and consumer electronic devices, including tablets, video game consoles, Apple TV, Roku, and Chromecast.

In 2011, Netflix introduced DVD-only plans and separated the combined streaming and DVD plans, making it necessary for subscribers who want both to have separate plans. – Warrior Trading News