Netflix misses subscriber growth forecast
Netflix may be the home of a roster of superhuman Marvel characters, but the company itself is only as good as its human users — the streaming video leader saw its stock plummet after falling short of its expected subscriber additions in the second quarter of 2018.
The California-based streaming TV provider added nearly 5.2 million new subscribers during the April-June period, more than one million short of the 6.2 million it had forecast.
Netflix’s shortfall hit not only in the U.S. — where it added fewer than one million new subscribers, short of the 1.2 million expected — but also internationally, where its 4.6 million new subscribers missed the forecasted growth estimate of five million.
Wall Street had expected Netflix, as it has done for the previous four quarters, to surpass its own expectations and add nearly 6.3 million total, according to Bloomberg.
Netflix also fell short of its own revenue forecast, posting $3.9 billion, just shy of the $3.934 billion expected, but 40 per cent higher than the $2.785 billion in the April-June period last year. Wall Street had expected $3.937 billion, based on estimates of analysts polled by S&P Global Market Intelligence.
Netflix posted net income of $384.3 million, compared to $65.60 million in the same period a year ago, beating analysts’ estimates of $357.5 million. Earnings per share of 88 cents surpassed expectations of 79 cents.
The Net TV company now has 124.4 million paying subscribers, with a total of more than 130.1 million subscribers globally (the larger figure includes some customers on free trial periods).
“In general, acquisition which is up year on year wasn’t up as much as we thought it was going to be (in the three months),” Netflix chief financial officer David Wells said Monday on a video interview with other Netflix executives and Todd Juenger, senior analyst with investment firm Sanford Bernstein.
Growth over the past 12 months had been ahead of what was expected, he said.
“We are still on track for a strong growth year this year,” Wells said. “Maybe it’s going to come in a little bit differently than we (and) others expected.”
CEO Reed Hastings concurred that the video provider’s “fundamentals have never been stronger. Our viewing is setting year-over-year records, the shows that we have coming, so we are feeling very strong about the business.”
Netflix also expects growth during the third quarter (July-September) to slow, with a total of 5.1 million new subscribers forecasted — about 4.45 million internationally and about 700,000 in the U.S. — about the same additions seen in the three-month period last year.
However, Hastings noted in a letter Monday to shareholders describing its quarterly financials. that overall consumer uptake of internet video is “growing globally and we are fortunate to be one of the leaders.”
And he noted that Netflix’s haul in the Emmy announcements last week surpassed that of longtime leader HBO, picking up 112 nominations versus HBO’s 108. “In addition to succeeding commercially, we are starting to lead artistically in some categories,” he said.
Given the growing competition in broadband-delivered video, Netflix’s second-quarter growth slowdown is not “entirely surprising,” said eMarketer principal analyst Paul Verna in a statement.
However, Netflix will “remain the clear leader among video streaming services in the U.S.,” he said.
“Netflix has a strong slate of original content that should keep it in the forefront among streaming services, and it plans to continue outspending the competition to develop TV programming and feature films. This is critical in an era when people increasingly choose streaming services on the strength of their content.”