Stock Tanks on Weak Subscriber Adds — Netflix Earnings

Stock Tanks on Weak Subscriber Adds — Netflix Earnings

Global streaming subscriptions make up more than half of Netflix's value, according to a recent research report from investment firm Trefis.

In the third quarter, Netflix expects to add 5 million subscribers - 650,000 in the U.S. and 4.35 million internationally.

The company reported quarterly revenue of $3.91 billion and earnings per share of 85 cents.

Shareholders and analysts now have the job of weighing whether the slowdown is a blip or a longer-term problem.

Netflix predicted it would add five million subscribers in the current quarter, which ends in September, slightly slower than the pace a year ago.

"These are still millions of new subscribers, even if they didn't meet the expectations that might have been set by the last two quarters, which were extraordinarily high", he said.

Netflix's explosive growth may be starting to plateau. "Now future projections are suspect and that decimates valuation", said Eric Schiffer, chief executive officer of private equity firm Patriarch.

The CEO touted the success of its sci-fi action series, "Lost in Space", as well as the second season of its popular original series, "13 Reasons Why".

Potential new customers may have also been distracted by the World Cup, a quadrennial soccer tournament that is among the most-watched TV events in the world.

Five Questions on the Trump-Putin summit
The paper reported that as a result of the discussions between the two leaders many things had changed for the better. He visibly seemed happier with Mr Putin's assurances than he did with the evidence of his own intelligence agencies.

On top of growth, the company has begun to focus on its profitability. That may seem impressive at first glance, but it's more than 1 million fewer subscribers than what the streaming giant was anticipating.

The company will spend as much as $8bn on programming this year.

Profit was a bright spot in the latest quarter, but not by enough to reassure investors.

Total revenue for the period was $3.91bn (£2.9bn), at a yearly growth of 40.3 per cent. Analysts had expected revenue of $3.94bn.

Netflix has been paying up big time for its content. Netflix said Monday that it expects content expenses to hit $8 billion this year. Marketing expenses surpassed $500 million in the quarter, almost double the amount spent a year ago.

Netflix shares have doubled in value this year, and just this week the company surpassed HBO with the highest number of Emmy nominations of anyone, with 112. Disney is selling an internet version of its sports network ESPN and plans to introduce a general entertainment video service next year.

At the same time, Netflix faces growing competition.

"Our strategy is to simply keep improving", Hastings said in the letter to shareholders, "as we've been doing every year in the past".

"There's a distinct risk of a ripple effect", Arnott said.

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