Netflix shares dive as subscriber growth misses mark

July 17, 2018
Netflix shares took a hit after disappointing growth figures for the second quarter

Netflix shares plunged Monday after the leading streaming television service said subscriber growth fell short of expectations in the recently ended quarter.

Membership in the quarter grew 5.2 million to a total of 130 million, matching the same period last year but a million shy of what Netflix had forecast, according to a letter released along with earnings figures.

Netflix shares dropped 14.11 percent to $343.97 in after-market trade, in a setback to the television juggernaut operating in some 190 markets around the world.

"We had a strong but not stellar Q2 (second quarter)," Netflix said in a letter to shareholders.

"Earnings, margins, and revenue were all in-line with forecast and way up from prior year."

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

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

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

"After four consecutive quarters of beating its own guidance, and analysts' expectations on key metrics such as revenues, profits, and subscriber gains, Netflix disappointed with a weak Q2," said eMarketer principal analyst Paul Verna.

"This isn't entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix's expense," he added.

Competition in the streaming television market includes YouTube, a platform under the umbrella of Google parent Alphabet, and entertainment titan Disney, along with AT&T.

However, GBH Insights saw the Netflix subscriber forecast miss as a "speed bump," rather than start a downward trend, reasoning that the "content arms race continues to be a major tailwind" for the company.

"While the knee jerk reaction will clearly be negative from the Street's perspective, we would be buyers of Netflix on this weakness," GBH Insights technology research head Daniel Ives said in a note to investors.

Netflix has spent billions of dollars on original content, backing films or shows from creators from a gamut of countries and cultures as it strives for broad appeal as a global .

"We continue to ramp up our production of non-English originals," Netflix said in the letter.

"Our international originals can be important to specific countries and regions and also play well outside of their home markets."

Netflix added that while there is an increasing focus in the traditional film industry on superheroes and sequels, the on-demand service can serve a broad variety of tastes.

Explore further: Netflix shares jump as subscriptions top 100 million

Related Stories

Netflix lifted by 'beautiful' quarterly report

January 23, 2018

Netflix shares raced higher in after-hours trade Monday as the streaming television giant reported better-than-expected gains in its global subscriber base and a quarterly profit that nearly tripled from a year ago.

Recommended for you

The powerful meteor that no one saw (except satellites)

March 19, 2019

At precisely 11:48 am on December 18, 2018, a large space rock heading straight for Earth at a speed of 19 miles per second exploded into a vast ball of fire as it entered the atmosphere, 15.9 miles above the Bering Sea.

Revealing the rules behind virus scaffold construction

March 19, 2019

A team of researchers including Northwestern Engineering faculty has expanded the understanding of how virus shells self-assemble, an important step toward developing techniques that use viruses as vehicles to deliver targeted ...

Nanoscale Lamb wave-driven motors in nonliquid environments

March 19, 2019

Light driven movement is challenging in nonliquid environments as micro-sized objects can experience strong dry adhesion to contact surfaces and resist movement. In a recent study, Jinsheng Lu and co-workers at the College ...

Levitating objects with light

March 19, 2019

Researchers at Caltech have designed a way to levitate and propel objects using only light, by creating specific nanoscale patterning on the objects' surfaces.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.