Netflix shares plummet after company reveals disappointing subscriber growth


The streaming video pioneer added 5.2 million customers from April through June, 1 million fewer than forecasts from Thomson Reuters I/B/E/S, as it added new programming including "Lost in Space" and new episodes of Marvel's "Jessica Jones" and "13 Reasons Why". Unfortunately it had added 5.2 million new members, the same as in Q2 previous year, and a significant double digit percentage lower than the expected 6.2 million new members. Wall Street had expected the company to report even more subscribers than it had forecast.

Shares of Netflix were down 14 percent in after-hours trading to $344 per share, immediately after the company reported its earnings.

Despite its second-quarter misfire on subscriber growth, the Los Gatos, California, company reported earnings that beat analyst estimates.

J.P. Morgan reiterated an Overweight rating, while increasing its price target to $415 per share from $385, saying it does not believe the latest subscriber numbers "reflect a fundamental change in the Netflix story".

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 a year ago.

Looking ahead to the next quarter, Netflix is already anticipating additional challenges to subscriber growth.

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

In a letter to shareholders, Netflix called its second-quarter performance "strong but not stellar". Revenue climbed 6 percent to $3.9 billion. The reason behind this is that Netflix is now has a free cash flow of negative $559 million meaning they once again spent more in the second quarter of 2018 than they made.

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

In the letter to shareholders, Netflix said it expected more competition from global players including ProSiebenSat 1 Media in Germany and on-demand service Salto in France.

He added the expectation that despite the weaker-than-expected results, the company was expected to continue to be the leading video streaming service across the US.

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