Netflix shares down after slower than expected subscriber growth
Netflix Inc’s shares dropped 14% on Monday following slower than expected subscriber growth of 5.2 million new customers from April to June.
In after-hours trading, the company’s shares slipped to $343.60, compared to an earlier close of $400.48m, wiping out $24.2bn in market capitalisation.
The streaming giant added 670,000 subscribers in the US in the second quarter, well below the 1.2 million it had forecast, while it signed up 4.47 million subscribers internationally, compared to predictions of 4.97 million. New content launched in the quarter included Lost In Space and new episodes of 13 Reasons Why and Jessica Jones.
The results sparked concerns that Netflix’s growth is slowing, although the company noted in a letter to shareholders that while it had overestimated growth for the second quarter, it had underestimated new subscribers for seven of the past 10 quarters. It also warned that subscriber growth in the third quarter would hover around 5 million, again below analyst predictions of 6.3 million.
Netflix CEO Reed Hastings (pictured) described the shortfall as an unexplained blip, similar to a temporary slowdown in 2016 that the service soon recovered from. “The fundamentals have never been stronger,” Hastings said. The company reported a profit of $384.3m for the second quarter, up from $65.6m in the corresponding quarter in 2017.
Netflix is investing around $12bn on new content this year, including local-language content in several Asian territories such as India where it recently launched critically acclaimed series Sacred Games. Hastings also observed that the company beat HBO with 112 nominations at the recent Emmy awards.
But the service faces increasing competition from Amazon Prime Video, HBO and Hulu, which are all slowing eating into US market share, along with new entrants such as Apple.