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Netflix stuns Wall Street by attracting fewer subscribers than expected last quarter and rekindled fears that the video streaming service was turned into a bubble. investment ]
The company's shares dropped by 15% after Netflix announced that it added 5.2 million users during this period, about a million less than expected .
Shares reduced their losses before the US market opened on Tuesday and fell 12% to 6:18 in New York.
Netflix's forecasts for this quarter also reflect a slowdown: the world's largest online pay-TV network expects to add 5 million customers, a slower pace than at the same time. Last year.
Shareholders and analysts must now assess whether this slowdown is a one-time event or a longer-term problem .
Netflix shares had more than doubled their price this year and investors They bet that the company would add tens of millions of customers around the world in the years to come.
Perhaps, along the way, Wall Street has focused more on the attractiveness of the Netflix story than on the fundamentals of the company, he explained. Rob Arnott Director of the Research Affiliates Fund Corporation.
"They can be considered a bubble," Arnott said on Bloomberg Television.
There is nothing to fear
At a conference with analysts and investors, Netflix executives showed little concern and insisted that anyway their growth over the last 12 months exceeded expectations.
A few years ago, the company did not reach its expectations, which at the time were attributed to the transition to credit card tokens.
One reason for the violation of the lens could be in the lack of content streaming service.
Netflix published a few shows in the last quarter compared to his typical production, plus did not add seasons to his main hits such as Stranger Things and none of the new shows have been turned into a phenomenon.
Since Netflix launched House of Cards in 2013, the company has recognized the role of the new seasons of the original series to attract customers.
It is also possible that new potential customers were distracted by the World Cup, the football tournament that is one of the most watched TV events in the world.
'Fort, but not stellar'
Netflix's second quarter revenue was also lower than expected. The company recorded revenues of $ 3,910 million, compared to an average projection of $ 3,940 million.
But the company based in Los Gatos, California, has taken a new step: international customers accounted for more sales than locals.
Netflix, which was primarily a service for English speakers, increased its investment in programs recorded in other languages.
The company presented its first recorded dramas in Denmark and India during the quarter and plans to launch a new program in foreign languages at least once a week next year.
"We had a strong quarter, but not exceptional," wrote the company in a letter to shareholders
Spend a lot, the flip side
Produce and promote a broad catalog of programs for an audience. Global has come at a very high cost. Netflix has had to constantly use loans to maintain its programming
The company calculates that it will spend between $ 3 billion and $ 4 billion more than it will produce in 2018.
By cons, Marketing spend exceeded $ 500 million in the quarter, almost double the amount invested the year before.
The rise of Netflix has spurred other entertainment and technology companies to invest more in their own streaming services.
Disney promotes the online version of his sports channel ESPN and plans to introduce his own platform next year, while Apple has invested more than a billion dollars in its original programming.
On Monday, Netflix said that even though it expects competition to develop, it does not consider that it will have a negative effect on its business.
"Our strategy is simple: continue to innovate, as we do every year," said the company.
Rob Arnott director of research fund research firm Research Affiliates calculates that the path marked by Netflix has a large impact on indicators.
The company, for example, is the second-best-performing S & P500 index since the beginning of the year
"There is an obvious risk of domino effect", adds Arnott.
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