Published: Wed, July 18, 2018
Culture | By Henry Herrera

Netflix shares plunge in after-hours trade after forecast miss

Netflix shares plunge in after-hours trade after forecast miss

"This latest quarter underlines my belief that Netflix needs subscribers and it needs them fast".

Despite the weak quarter, and a lowered outlook for the third quarter, Emarketer expects Netflix to remain the clear leader among video streaming services in the US.

Shares of Netflix, which have more than doubled since the start of the year, dropped by around 14 percent in after-hours trading. Wall Street had expected the company to report even more subscribers than it had forecast. If the stock plunges on the same trajectory during Tuesday's regular trading session, it will be the steepest drop in almost four years. The company didn't add as many new subscribers as analysts expected, something that's being blamed on a dearth of new content during the second quarter.

"Netflix is in a business that varies by quarter anyway and perhaps the company shouldn't have gotten too enamored with the insane success of the last two quarters, which was invigorating but not sustainable", Forrester analyst James McQuivey said. Netflix now has 130 million total subscribers, with more than half coming from outside the U.S. This time, for Netflix, it was a negative - membership growth seems to have stalled. Netflix's marketing budget increased 92 percent since the same time previous year, hitting $526 million for the quarter. Revenue rose 5.6 percent, to $3.91 billion.

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For the three months ending on June 30, Netflix reported revenue of $3.9 billion and earnings of 85 cents a share - touching analyst estimates of $3.94 billion in revenue and beating projections of $0.79 per share.

Netflix will spend as much as $8 billion producing and acquiring TV shows and movies this year, including Disenchantment from The Simpsons and Futurama creator Matt Groening, new seasons of House of Cards and Making a Murderer, and presumably several series and films yet to be announced. This is isn't entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix's expense.

In the letter to shareholders, Netflix said it expected more competition from global players including ProSiebenSat 1 Media in Germany and on-demand service Salto in France. The world's biggest tech company, Apple, also plans to launch a streaming service that would compete with Netflix.

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