Netflix says subscriber gains won’t rebound as fast as Wall Street wants, stocks fall

Shares of Netflix Inc. fell after-hours on Tuesday, after the streaming service revealed its worst quarter yet for adding new subscribers and said the current quarter would have fewer additions than Wall Street hadn’t foreseen it.

The NFLX video streaming giant,
Tuesday reported 1.54 million new net paying subscribers in the second quarter, the lowest quarterly total for the company yet, but exceeding its own forecast as well as the average analyst forecast of 1.15 million, according to FactSet. The additions look even smaller when put next to gains made earlier in the COVID-19 pandemic – Netflix added more than 10 million new net subscribers in the same quarter a year ago.

Netflix predicted that 3.5 million new net paying subscribers would join the 209.2 million already on the service in the third quarter, which was not the kind of resurgence Wall Street was looking for. Analysts on average expected an increase of 5.5 million new subscribers in the third quarter and 9.64 million in the fourth quarter, according to FactSet.

While fewer new subscribers signed up, Netflix made more money from the increase in subscription prices. Netflix said it earned $ 1.35 billion, or $ 2.97 per share, up from $ 1.59 per share a year ago, but still below expectations of $ 3.18 per share, analysts surveyed said. by FactSet. Netflix revenue climbed 19.4% to $ 7.34 billion, barely beating estimates of $ 7.32 billion.

“COVID has created some instability in the growth of our members (higher growth in 2020, slower growth this year), which is catching on,” executives said in a letter to shareholders on Tuesday.

Netflix has maintained a large subscriber advantage in a crowded streaming market that includes rivals Walt Disney Co. DIS,
+ 2.20%,
Apple Inc. AAPL,
+ 2.60%,
AT&T Inc. T,
+ 0.43%,
Comcast Corp. CMCSA,
+ 0.79%,
and Inc. AMZN,
+ 0.66%
despite a shortage of fresh content in the first half of 2021. But with the return to work of many Americans – in the case of Netflix, production talent on series and films – analysts expect Netflix to bounce back in the second semester of this year in the form of new shows and movies appear on the service.

The Silicon Valley streaming giant has said it plans to spend more than $ 17 billion in cash on content this year, and analysts say the return of shows will be a powerful catalyst in the second half of the year. Netflix expects to release new seasons of popular shows like “Sex Education,” “The Witcher,” and “You,” as well as films like “Red Notice,” starring Gal Gadot, Dwayne Johnson, and Ryan Reynolds, and ” Don’t Look Up, ”starring Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett and Meryl Streep.

Shares of Netflix fell about 3% in the after-hours session on Tuesday, after closing 0.2% lower at $ 531.05. The stock is up 1% so far this year, while the broader S&P 500 SPX index,
+ 1.52%
gained 16.5% in 2021.

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