Netflix's share price slumps 14 per cent after disappointing second quarter

Danny Woods
July 17, 2018

Netflix missed its own estimates - as well as Wall Street's projections - on subscriber growth by 1 million new accounts when the streaming giant reported its second-quarter financial results on Monday afternoon, sending its stock price tumbling more than 10 percent in the process.

The site added 5.2m subscribers globally in the three months to June, about a million fewer than it had forecasted.

During the quarter, net income rose 32.5 percent, to $384.3 million, or 85 cents a share, from $65.6 million, or 15 cents, a year earlier. According to Bloomberg, analysts were projecting the company would add 5.93 million in the period - 875,000 domestically and 5.05 million internationally. For the current quarter ending in October, Netflix said it expects revenue in the range of $3.99 billion.

However, investors appeared spooked by the missed subscriber forecast, causing shares to fall by 14 percent to $345.63 in extended trading Monday. The company didn't add as many new subscribers as analysts expected, something that's being blamed on a dearth of new content during the second quarter.

Despite the weak quarter, and a lowered outlook for the third quarter, Emarketer expects Netflix to remain the clear leader among video streaming services in the US. But the Los Gatos, California-based company hit a milestone: global customers accounted for a bigger piece of sales than domestic users.

There seems to be a number of things at play, most of which could have negative impacts on the progress of Netflix.

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The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., January 18, 2017. Wall Street consensus Q2 2018 estimates were for $3.94 billion in revenue and EPS of 79 cents. Analysts were expecting 6.3 million - 1.2 million in the United States and 5.1 million internationally, according to Bloomberg.

We were honored last week with the most Emmy nominations of any network.

At the same time, Netflix faces growing competition. YouTube has also solidified its position as one of the popular internet entertainment services worldwide.

AT&T has just bought Time Warner in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix.

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

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