Netflix shares plummet after a drop in new subscribers in Q2.
Netflix added 1 million fewer new subscriptions than Thomson Reuters estimates and below the 7,41 million new subscribers in the first quarter; the surprisingly negative performance resulted in a 14% drop in the company's share price.
(Reuters)- Netflix shares were heading for their worst day in two years on Tuesday, falling as much as 14%, after the company reported a surprising drop in new subscriber numbers in a quarter marked by the lack of a major hit and the World Cup.
Although Wall Street remains extremely optimistic about Netflix and its role in global video streaming, second-quarter data raised a question mark over future growth, with six brokerages lowering their price targets for the stock.
“The quarter is a reminder that the cadence of new Netflix subscriptions is not linear, but irregular in nature,” said Justin Patterson, an analyst at Raymond James and Associates in San Francisco, although he pointed to the absence of a new hit series as a growth driver.
"The company had a lot of new content during the quarter; what it didn't have was a major series with new episodes," said the analyst.
Riding on the success of original series such as "13 Reasons Why," "House of Cards," and "Orange is the New Black," Netflix has exceeded subscription growth expectations in seven of the last 10 quarters.
The share price has doubled in the last year, raising the company's market value to nearly $200 billion by Monday's close.
What remains unclear is where the obstacles to growth will arise, whether it be stronger competition from Amazon Prime or changes in the control of major films and franchises with the bids from Walt Disney Co. and Comcast for Twenty-First Century Fox.
Netflix added 5,15 million subscribers between April and June, 1 million fewer than Thomson Reuters I/B/E/S estimates and below the 7,41 million new subscribers in the first quarter.