Netflix shares dive after disappointing quarterly results

Netflix shares dive after disappointing quarterly results

Netflix shares dive after disappointing quarterly results

Revenue was up 6 percent to $3.9 billion.

The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., January 18, 2017. This sent Netflix shares tumbling 12.6% (at time of this posting) in after-hours trading.

All told, Netflix now boasts upwards of 130 million subscribers across the globe.

The miss on subscribers for the second quarter "isn't entirely surprising", according to eMarketer principal analyst Paul Verna, as rivals including Amazon, Hulu, and HBO are gaining share of the subscription-video market at Netflix's expense.

Along the way, Wall Street may have focused more on the allure of the Netflix story, rather than the company's fundamentals, said Rob Arnott, head of fund advisory firm Research Affiliates.

"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.

The company added 5.2 million subscribers in its second quarter, about 1 million less than what its own forecast showed. The company is spending heavily to hook new customers, budgeting $8 billion for programming and $2 billion for marketing in 2018. Global subscriber net additions are projected at 4.35 million, again, below the average 5.095 million.

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J.P. Morgan reiterated an Overweight rating, while increasing its price target to $415 per share from $385, saying it does not believe the latest subscriber numbers "reflect a fundamental change in the Netflix story".

During the quarter, net income rose 32.5 percent, to $384.3 million, or 85 cents a share, from $65.6 million, or 15 cents, a year earlier.

Total streaming revenue for Q2 18 is US$3,814 million, up from US$2,671 million during the same period previous year. It is making a big push in India.

"Right now, Netflix is still miles ahead of its closest competitor, but there is going to be a giant bulls-eye on Netflix's back during the next 18 to 24 months", Ives predicted in an interview.

At the same time, cable distributors are offering smaller and cheaper bundles of channels.

In the letter to shareholders, Netflix said it expected more competition from worldwide players including ProSiebenSat 1 Media in Germany and on-demand service Salto in France.

"Our strategy is to simply keep improving", the company stated.

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