Netflix Stock Plummets From Lack Of Subscriber Growth
Missing its projection for the first time in five quarters, Netflix stock is down nearly 14%
Netflix (NFLX) posted a weaker-than-expected second-quarter subscriber and revenue numbers earlier this afternoon, which sent its stock down during after-hours trading.
The company announced that it added 5.2 million streaming users in the second quarter, a significant drop from the 6.2 million it had estimated back in April. It also missed its April estimate of 5.9 million international subscribers and 1.2 million domestic subscribers by hundreds of thousands of users, resulting in only obtaining 4.47 million and 670,000 respectively.
In total, Netflix reported the following:
Revenue: $3.91 billion vs. $3.94 billion estimated.
Earnings per share (EPS): 85 cents (including $85 million in non-cash unrealized gain).
International subscriber additions: 4.47 million subscribers vs. 5.11 million subscribers estimated
Domestic subscriber additions: 674,000 vs. 1.23 million subscribers estimated
Whether or not the company can sustain its share price growth, which has been over 100% year-to-date now seems questionable. Although it’s expected to spend 8 billion in developing 700 new pieces of content, there in increasing competition from Amazon, Disney and AT&T, which are looking to ramp up production of digital content this year.
In a letter to shareholders, Netflix said the company had a "strong but not stellar" quarter, acknowledging the company had “over-forecasted” both domestic and global net subscriber additions and “acquisition growth was lower than we projected.” The company goes on to blame strengthening of the U.S. dollar for its weaker-than-expected international revenue.
“We slowly adjust pricing over time to mitigate forex moves over the longer term, but when currency movements are rapid, they will affect our near term operating margin,” Netflix wrote. “We’ll tend to outperform our near term operating margin targets on dollar weakness and underperform on dollar strength.”
With over 110 million current subscribers globally, it might be hard for Netflix to continue such rapid growth and stay the king of digital video subscription for long.
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