Published: Wed, July 18, 2018
Entertaiment | By Simon Arnold

Netflix shares plunge in after-hours trade after forecast miss

Netflix shares plunge in after-hours trade after forecast miss

Netflix shares tumbled more than 14 percent in after-hours trading on Monday after the streaming giant missed its second-quarter growth forecast by more than a million subscribers.

ChannelNews understands that sign ons in Australia have slowed "significantly".

Netflix expects third quarter revenue to be $3.99 billion United States and new subscription adds of five million, compared with 5.3 million in the same quarter a year ago.

Its outlook for the current quarter also reflected a deceleration.

Earnings per share came in at 85 cents, beating the 79 cents predicted by analysts surveyed by Thomson Reuters I/B/E/S.

"Netflix is in a business that varies by quarter anyway and perhaps the company shouldn't have gotten too enamored with the insane success of the last two quarters, which was invigorating but not sustainable", Forrester analyst James McQuivey said.

One reason for the shortfall may have been a lack of content. Netflix released a thin slate of shows in the quarter, relative to its typical output. Bloomberg notes that there were no additional seasons of its biggest hits, such as Stranger Things, nor were there any brand-new shows that found massive success.

Potential new customers may have also been distracted by the World Cup, a quadrennial soccer tournament that is among the most-watched TV events in the world.

Netflix had an average of 124.4 million paying subscribers in the quarter, up from 118.9 million in the first quarter but below its guidance of 125 million.

Netflix is expected to face increasing competition in the next year or two.

Looking ahead to the third quarter, the company is calling for $0.68 in EPS on $3.99 billion in revenue.

Chief Executive Reed Hastings, in a letter to shareholders, called it a "strong but not stellar Q2".

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. "They also raised concerns as competitors like Amazon ramp up their streaming efforts, while others like Disney and AT&T are prepared to invest in more digital content. Netflix is expected to spend up to $8 billion this year on 700 original series". Apple Inc., meanwhile, is spending more than $1 billion on original programming. "Our strategy is to simply keep improving, as we've been doing every year", the company said.

Like this: