Netflix Inc. shares plunged more than 10% in the extended session Wednesday after the video-streaming giant badly missed projections for new paid subscriptions.
Netflix NFLX, -0.97% reported the addition of just 2.7 million paid subscribers globally in the second quarter, far short of what Wall Street and the company expected. Analysts were looking for global paid streaming subscriber additions of 5.3 million, according to FactSet, on domestic additions of 350,000 and 4.8 million internationally. Netflix had projected 5 million new customers.
The company reported second-quarter earnings of 60 cents a share, compared with $384 million, or 85 cents a share, in the year-ago period. Revenue grew to $4.92 billion from $3.9 billion in the year-ago period. Analysts surveyed by FactSet had estimated 56 cents a share on revenue of $4.9 billion. The company’s subscriber base is being closely watched as some of the world’s biggest brand names jump into the video-streaming business to challenge Netflix. Apple Inc. AAPL, -0.56% and Walt Disney Co. DIS, -1.19% join the fray this year, with AT&T Inc.’s T, -0.95% HBO Max and Comcast Corp.’s CMCSA, -1.46% NBCUniversal scheduled to launch services in 2020.
At the same time, Netflix is pouring billions of dollars into original content. The Los Gatos, Calif.-based company spent $12.04 billion on content last year, up 35% from $8.9 billion in 2017, according to its fourth-quarter 2018 earnings report. Netflix’s ever-changing content lineup isn’t likely to tap the brakes on future net additions and healthy average revenue per user, Morgan Stanley analyst Benjamin Swinburne concluded in a July 16 note to clients. He says the imminent losses of “The Office” and “Friends” are “manageable” as the company’s original productions become its single biggest source of content. Swinburne maintains an overweight rating and price target of $450.
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