Netflix was unable to meet its new subscriber target during its second quarter, wounding its market value.
The company’s shares lost a massive 14 percent of their value in overnight trading.
Falling Short on New Subscribers
Netflix was able to add a striking 5.1 million new users to its streaming service during the second quarter running from April through June. However, despite this achievement, it failed to meet its own target of over six million. This represents the first time in over a year that Netflix has been unable to exceed its own subscriber growth expectations.
The streaming video service company posted a $3.91 billion revenue. This represented a tremendous 40.2 percent increase when compared to the revenues seen in 2017’s second quarter. However, analysts had been predicting revenues of $3.94 billion. That said, earnings per share did beat forecasted figures of 79 cents by quite a bit at 85 cents.
Falling short both on analyst expectations and on subscriber numbers led to immediate tech investor disappointment. The stock fell that day from $400.48 at its highest point to $343.60.
Netflix issued a letter to its shareholders stating: “We had a strong but not stellar Q2, ending with 130 million memberships. Earnings, margins and revenue were all in line with forecasts, and way up from the prior year.” It also added that “Internet video is growing globally, and we are fortunate to be one of the leaders.”
Netflix was far from disappointed with its recent achievements. It pointed out in its letter to investors that they were “starting to lead artistically in some categories, with our creators earning enough Emmy nominations this year to collectively break HBO’s amazing 17-year run.”
For the company’s third quarter, it said it anticipates an additional five million subscribers to join. It also identified some of its top rivals as being YouTube, Amazon, Apple, Disney and HBO.
“Each of these firms has unique content and is striving to find the best creators from around the world to entertain its viewers. There has never been a better time to be a creator or consumer of content. We believe that consumer appetite for great content is broad and that there is room for multiple parties to have attractive offerings,” read the letter.
That said, Netflix also acknowledges that the recent AT&T acquisition of Warner Brothers (for $85 billion in June), and the current 21st Century Fox takeover effort outcomes, will more than likely bring on new forms of competition.
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