Netflix misses new subscriber targets, shares take a pounding
Netflix has previously projected an addition of 1.2 million domestic subscribers for the second quarter of 2018 (ending June 30), but instead, it only managed to add 670,000 new subscribers. In international markets, Netflix also missed targets, adding 4.5 million new subscribers as opposed to the projected 5 million subscribers.
It was the domestic results that most disappointed investors, with the same quarter a year ago seeing more than a million new subscribers. Some analysts have predicted that Netflix may be close to reaching market saturation in the US, and now must look increasingly towards overseas markets to maintain its growth.
Netflix share prices dropped by more than 13% in trading after the announcement, to a low of $347.07, but has since recovered to $375.13. It is still down from the high of $400.48 just prior to the announcement.
Netflix CEO and co-founder Reed Hastings, along with CFO David Wells, played down the poor results and blamed it on lack of accuracy with internal projections.
"This Q2, we over-forecasted global net additions … as acquisition growth was slightly lower than we projected," Hastings and Wells wrote. Both pointed to a similar disappointing result two years ago, after which Netflix continued its strong growth with no particular reason being found for the "lumpiness in the business".
Netflix has projected lower subscriber growth in the current quarter, 650,000 domestic and 4.35 million internationally.
In terms of financial results, Netflix generated a net income of $384 million on revenue of $3.9 billion. Gross debt level is now at $8.4 billion, with a cash balance of $3.9 billion.
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