Netflix shares tank after big miss on subscriber growth

Jul 18, 2018, 00:26
Netflix shares tank after big miss on subscriber growth

Shares of Netflix fell 13% today after it reported a surprise shortfall in subscriber additions for a second quarter marked by the lack of a blockbuster new show and the soccer World Cup. Internationally, the company added 4.47 million new subscribers, short of its guidance for 5 million.

Netflix said it made a profit of US$384 million on revenue of US$3.9 billion in the recent quarter, compared to net income of US$66 million on US$2.8 billion in revenue in the same period past year.

With all this, the stock is tanking.

Wall Street analysts had expected Netflix revenue to be slightly higher.

Netflix shares tank after big miss on subscriber growth
Netflix shares tank after big miss on subscriber growth

It is a crucial measurement for investors as subscriptions are key to funding the company's investment in its own TV shows and movies, which is expected to hit $8bn (£6bn) this year alone.

Some investors have seen Netflix as the future of television-a sure-to-be dominant hub for all our entertainment viewing.

Analysts had been modeling $3.94 billion in revenue and EPS of 79 cents.

As of June 30, Netflix had 130 million subscribers, including 57.4 million in the US.

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

Netflix said it added just 670,000 subscribers in the USA for the period ending in June, about half of its own projection of 1.2 million. Total revenue rose 40.2 percent to $3.91 billion.

Netflix said operating margins would be narrower than previously expected because of the rapid strengthening of the US dollar, which appreciated by more than 5 percent against major trading partners' currencies in the second quarter.

Netflix has been paying up big time for its content. Netflix said Monday that it expects content expenses to hit $8 billion this year.

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In announcing earnings, Netflix also touted its historic 112 nominations for this year's Primetime Emmy Awards, announced last week, stealing HBO's 17-year streak as the top-nominated network or service.

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.

At the same time, Netflix faces growing competition.

Walt Disney is hoping to close on a deal to buy prized entertainment franchises from 21st Century Fox to feed into a video streaming service Disney will debut next year.

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"Our strategy is to simply keep improving", Netflix said.

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