Netflix shares take hit as subscriber slip hints at 'lumpy' road ahead

Netflix shares take hit as subscriber slip hints at 'lumpy' road ahead

Netflix shares take hit as subscriber slip hints at 'lumpy' road ahead

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

Despite this, Netflix added 5.1 million households over the three-month period - giving it 130 million subscribers overall with 57.4 million in the USA and nine million in the UK.

While the misses seem minuscule for a company with more than 125 million global subscribers, they could validate investors' fears of a company in slowdown mode for the first time in years. The company's shares fell by 13.1 per cent to $348.15 in after-hours trading.

Analysts had been modeling $3.94 billion in revenue and EPS of 79 cents. The company expected to hit 5.11 million subscribers globally and 1.23 million subscribers domestically, but it actually hit 4.5 million and 700,000, respectively. It had projected the addition of 6.2 million subscribers in the quarter, but it managed to get 5.2 million instead.

Still, Netflix ended Q2 with 130.1 million global subs, up 25% year over year, with 56 million in the USA and 72.8 million elsewhere.

In its trying-hard-to-be-positive letter (PDF) to shareholders, Netflix said that it had "a strong but not stellar Q2, ending with 130 million memberships".

Netflix is facing growing competition from global tech rivals and traditional providers
Image Netflix is facing growing competition from global tech rivals and traditional providers

The company's earnings beat Wall Street's forecast, but sales were below targets.

Netflix added 670,000 subscribers in the United States, well below analysts' estimates of 1.19 million, according to Thomson Reuters I/B/E/S.

Total streaming revenue for Q2 18 is US$3,814 million, up from US$2,671 million during the same period past year. For this quarter, Netflix added 4.5 million subscribers internationally, equivalent to an 8% growth. "In addition to succeeding commercially, we are starting to lead artistically in some categories, with our creators earning enough Emmy nominations this year to collectively break HBO's fantastic 17-year run".

At the same time, Netflix faces growing competition.

In the letter to shareholders, Netflix said it expected more competition from worldwide players including ProSiebenSat 1 Media in Germany and on-demand service Salto in France. Disney is selling an internet version of its sports network ESPN and plans to introduce a general entertainment video service next year. "Our strategy is to simply keep improving, as we've been doing every year", the company said.

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