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Netflix Inc. stunned Wall Street by attracting fewer subscribers than expected last quarter, renewing fears that the video streaming service has become an investment bubble.
Shares plunged up to 15% after Netflix added 5.2 million users over the period, about a million less than expected. Its forecast for the current quarter also reflects a deceleration: the largest online pay-TV network in the world plans to add 5 million customers, a slower pace than a year earlier.
Shareholders and analysts are now tasked with determining whether the blip slowdown or a longer-term problem. Netflix shares have more than doubled this year as investors bet that the company will add tens of millions of customers worldwide for years to come.
Along the way, Wall Street could focus more on the story of Netflix Rob Arnott, head of the fund research firm Research Affiliates
"They are considered a bubble," he said reported on Bloomberg Television
.
Netflix executives have expressed little concern over a call with analysts and investors, insisting that their growth over the past 12 months has still exceeded expectations. Netflix was below expectations a few years ago, a shortfall that the company attributed to the transition to smart credit cards at the time
"We have never found Explanation other than the heaviness of the company ". Reed Hastings said:
One of the reasons for this lack may be a lack of content. Netflix released a slender list of shows during the quarter, compared to its typical production. He has not added additional seasons of his greatest hits, such as "Stranger Things," nor has a new show become a phenomenon. Since Netflix released "House of Cards" in 2013, the company has credited new seasons of original series with luring customers.
Netfllix released a new season of "13 Reasons Why" and the Marvel series "Luke Cage", Rob Arnott, President and CEO of Research Affiliates, discusses Netflix's second quarter results
(Source: Bloomberg )
World Woes?
New potential customers may have been distracted by the World Cup, a quadrennial football tournament that is one of the most watched TV events in the world.
Read more: Shira Ovide on the true believers disappointed
value Netflix to a much higher level than other media companies of similar size because of this potential for future growth. Its market valuation surpassed that of Walt Disney Co. this year, although it reported less than a quarter of the turnover.
Netflix's second-quarter revenue was also lower than expected. It posted $ 3.91 billion against an average estimate of $ 3.94 billion. But the Los Gatos, California, business has taken an important step: international sales accounted for a larger sales figure than domestic sales
Global Giant
Netflix draws most of of its streaming revenue outside the United States. : Bloomberg
Formerly primarily for English speakers, Netflix has increased its investment in programs filmed in other languages. During this quarter, the company launched its first Danish and Indian dramas, and plans to launch a new foreign language program at least once a week next year.
Profit was positive in the last quarter, but not enough reassuring investors. Earnings amounted to 85 cents per share, exceeding the 79-cent estimate of analysts
"We had a strong but not exceptional quarter," wrote the company in a letter to shareholders
Spending Spree
and promoting a library of shows for a global audience was expensive. Netflix has borrowed money several times to pay for its programming and plans to spend between $ 3 and $ 4 billion more than in 2018. Marketing spend exceeded $ 500 million in the quarter, almost double the amount spent a year ago. 19659002] The rise of Netflix has pushed other technology and entertainment companies to invest more in online video services. Disney is selling an Internet version of its ESPN sports network and plans to introduce a general entertainment video service next year. Apple Inc., for its part, spends more than $ 1 billion on original programming.
Netflix said Monday that it expects more competition, but has ruled out any potential negative impact on its business. "Our strategy is simply to continue to improve, as we do every year," the company said.
Arnott, Research Affiliates, expects the Netflix rout to have a large impact on clues. He was the second biggest winner on the S & P 500 so far this year.
"There is a distinct risk of a coaching effect," said Arnott
– With the help of John Gittelsohn
