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Netflix Inc. posted weaker-than-expected second-quarter business and customer numbers on Monday afternoon, which plunged its stock into a sharp drop during opening hours.
Netflix
NFLX, + 1.18%
shares fell about 14% in the extended session after the company based in Los Gatos, Calif announced that it added 5 , 2 million streaming users in the second quarter, a substantial drop in the company estimate provided in April. The company added 4.47 million international subscribers and 670,000 domestic subscribers, missing its April estimates of 5.9 million and 1.2 million.
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The company announced a profit of $ 384 million, or 85 cents per share, exceeding consensus FactSet 79 cents per share and $ 66 million, or 15 cents per share, in the same quarter a year ago. Revenues went from $ 2.79 billion the previous year to $ 3.91 billion, slightly less than the FactSet consensus of $ 3.94 billion.
In a letter to shareholders, Netflix stated that the company had a "strong but not stellar" quarter, acknowledging that the company had "overestimated" the net additions of domestic and global subscribers, claiming that "growth acquisitions was below our expectations. "
The question for investors," said GBH Insights analyst Daniel Ives, was whether it was a quarter of them or signs of something more disturbing.
"I think that it is more of a problem of one quarter"
"Growing, especially in the field of technology, of Apple to Amazon via Netflix, you will run into one or the other. the issues of two quarters when they are white periods in the very short term. "
The company attributed the strengthening of the US dollar for its lower than expected international income.In April, Netflix predicted an impact of more than $ 65 million on international revenues one year into the future. 39; other, but the impact is revealed lower due to the strengthening of the US dollar compared to many international currencies.Netflix does not cover its income with derivatives.
"We adjust prices over time to mitigate longer-term currency movements, but when currency movements are fast, they will affect our operating margin in the short term, "writes Netflix." We will tend to outperform our margin targets short-term operational on the weak dollar and underperform on the strength of the dollar. "
In his letter, Netflix acknowledged growing competition from other entertainment companies. "HBO and Disney
DIS, + 0.18%
evolve to focus on Internet entertainment services. Amazon
AMZN, + 0.52%
and Apple
AAPL, -0.22%
invest in content as part of subscriptions to a larger ecosystem, "writes Netflix. "We expect increased competition from the combined AT & T / Warner Media, Fox / Disney or Fox / Comcast, as well as international players like ProSieben and Salto in France."
Netflix reiterated its commitment The content of the series "to serve a wide variety of tastes", citing its debut in the second quarter of the sci-fi action series "Lost in Space", which was renewed for a new season, and the release of the second season of 13 Reasons Why. Other second quarter offerings included the follow-up seasons of "Santa Clarita Diet", "A series of unfortunate events", "Marvel Jessica Jones", "La Casa de Papel", "GLOW" and " Marvel's Luke Cage ". beginning of several romantic comedies like "Set It Up" and "The Kissing Booth", which have both been "watched and loved by tens of millions of Netflix members", according to the company.
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The broadcasting giant has also doubled its international content, releasing the second season of "3%", a Brazilian science fiction thriller, as well as the original Indian movie "Lust Stories" and the Danish thriller "The Rain", which the company has declared to be one of the "greatest productions original non-English ". Some viewers and analysts have wondered if Netflix's content production rate would mean a decrease in the quality of its shows and films, but for the moment, critics seem to approve the company's offers, like Netflix the week last. won the highest number of Emmy nominations from all networks, beating HBO's acclaimed 17-year-old television networks.
The company is heavily focused on marketing, spending $ 576.7 million in the last quarter and only $ 1 billion. last six years He also increased spending on technology and development, spending $ 317.2 million in the second quarter. Last week, the company unveiled "Smart Downloads," a feature for users who download episodes to watch phones or tablets while on the move. The feature removes an episode after a user watches it, and then automatically downloads the next episode while the device is connected to Wi-Fi.
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Analysts have expressed concerns about Netflix's persistent negative free cash flow. During the second quarter, the company burned $ 559 million more than it contributed, 8.8% less than in the same quarter last year, while She had burned 608 million dollars. Netflix said it would continue to anticipate negative cash flows of $ 3 billion to $ 4 billion by 2018, meaning that its cash outlays will be weighted in the second half of 2018. Netflix completed its last bond transaction in $ 1.9 billion in the second quarter. and its gross debt balance now stands at $ 8.4 billion.
Netflix shares have surged by 109% so far this year, while the S & P 500
SPX, -0.10%
increased by 4.7%.
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