Netflix plunges as subscriber growth disappoints

Daniel Fowler
July 17, 2018

Netflix shares, which as one of the best-performing stocks have soared 109 percent this year, fell almost 14 percent to $344.60 in after-hours trading.

Last night it was revealed in NY, that Netflix added 5.2 million users in the second quarter, about a million fewer than the company predicted.

In a letter to shareholders, Netflix blamed the shortfall to faulty internal projections of its subscriber growth, explaining that such guidance is often volatile.

During the quarter, net income rose 32.5 percent, to $384.3 million, or 85 cents a share, from $65.6 million, or 15 cents, a year earlier.

"This latest quarter underlines my belief that Netflix needs subscribers and it needs them fast".

It signed up 4.47 million subscribers internationally, while analysts were expecting 4.97 million.

Despite its second-quarter misfire on subscriber growth, the Los Gatos, California, company reported earnings that beat analyst estimates.

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Global streaming subscriptions make up more than half of Netflix's value, according to a recent research report from investment firm Trefis.

Total revenue for the period was $3.91bn (£2.9bn), at a yearly growth of 40.3 per cent. Analysts had expected revenue of $3.94bn. Revenue climbed 6 percent to $3.9 billion.

"We had a strong but not stellar Q2", Netflix said in a quarterly letter to shareholders.

Netflix has already been battling challenges from Amazon, Google's YouTube and Hulu in the video streaming market, and it is likely to face even stiffer competition as other formidable rivals try to muscle into the market.

The Silicon Valley based company noted that it is beginning to "lead artistically" in some categories with its original content, earning enough Emmy nominations this year to break a 17-year top-spot streak by HBO.

"Right now, Netflix is still miles ahead of its closest competitor, but there is going to be a giant bulls-eye on Netflix's back during the next 18 to 24 months", Ives predicted in an interview.

Going forward, "We anticipate more competition from the combined AT&T/WarnerMedia, from the combined Fox/Disney or Fox/Comcast as well as from worldwide players like Germany's ProSieben and Salto in France", the company said in the investor letter. Apple Inc., meanwhile, is spending more than $1 billion on original programming.

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