Is Netflix in Trouble?
by EG
In terms of sheer monetary value, Netflix is, right now, a bigger company than entertainment behemoth Disney. A giant like that couldn't fall, could it? Well, the company revealed some financial news yesterday that clearly made investors a little worried about its future. Read on for details.
Netflix shares on Monday dropped significantly after the company reported slower-than-expected subscriber growth.
The streaming giant, which has seen user growth slow in the U.S. as it nears market saturation, had been counting on its global push to help it continue to grow at a rapid clip. But Netflix's international user growth disappointed on Monday when it reported its second-quarter earnings results.
Netflix brought in 5.15 million total new members during the quarter, far fewer than the 6.2 million it had forecasted in April and the 6 million that Wall Street was anticipating. The company had planned to add 5 million international members during the period, but instead added 4.47 million. Domestically, Netflix added 670,000 subscribers. It was Netflix's weakest quarter in terms of subscriber growth since the first quarter of 2017, when it also missed its forecasts over total net additions.
Netflix CEO Reed Hastings, in a letter to shareholders, called the quarter "strong but not stellar." He gave little reason for why the company's subscriber additions came in under previous forecasts. For the third quarter, Netflix is being more conservative and forecasting net subscriber additions of 5 million — 650,000 in the U.S. and 4.35 million internationally.
Later, in a pre-taped Q&A with Bernstein analyst Todd Juenger, CFO David Wells said that the weakness was "broad" across multiple markets and was not clustered in one part of the world. Hastings, meanwhile, noted that the company had a similar subscriber miss in 2016 and course corrected — even though execs never identified a cause for the unexpected quarter. "The fundamentals have never been stronger," he said of the current quarter results. "We're feeling very strong about the business."
Investors have long valued Netflix, based on its ability to continue to grow its subscribe base even as it has raised prices. But they remain skittish about Netflix's ability to sustain growth for an extended period of time, and Monday's earnings report could be viewed as a sign that such momentum is slowing.
Get the rest of the story at The Hollywood Reporter.
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