Netflix shares plunge as growth in subscriber numbers slows
Netflix shares fell 14% in extended trading on Monday, after the company reported slowing growth in subscriber numbers.
The company gained 5.1 million subscribers worldwide during the April-June quarter, more than one million below the number that management had believed it could.
It marked the first time in a more than a year that Netflix had not exceeded its subscriber growth projections.
As of June 30, Netflix had 130 million subscribers, including 57.4 million in the US.
It has renewed fears that its growth may sputter as the video streaming service tries to fend off fiercer competition.
The numbers released on Monday are a rare letdown for a company that has enthralled investors with its ability to consistently top expectations.
But Netflix missed its target badly in the April-June period, causing its high-flying stock to plummet by about 14% to 345.63 US dollars (£261.049) in extended trading.
The shares had more than doubled before the sell-off.
If the stock plunges on the same trajectory during Tuesday’s regular trading session, it will be the steepest drop in nearly four years.
GBH Insights analyst Daniel Ives called the second-quarter showing “a near-term gut punch” to Netflix.
Netflix predicted it would add five million subscribers in the current quarter, which ends in September, slightly slower than the pace a year ago.
The spring and summer months traditionally mark Netflix’s most sluggish period as more people go on holiday and spend time outside instead of watching video.
However, the company still reported earnings that beat analyst estimates.
Earnings grew 32% from last year to 384 million dollars (£290 million) Revenue climbed 6% to 3.9 billion dollars (£2.95 billion).
Bringing in more subscribers and money is vital for Netflix because it expects to keep spending more on exclusive TV shows and movies to try to stand out from rivals.
The company will spend as much as eight billion dollars (£6 billion) on programming this year.
Netflix has already been battling challenges from Amazon, Google’s YouTube and Hulu in the video streaming market, and it is likely to face even stiffer competition as other formidable rivals try to muscle into the market.
AT&T has just bought Time Warner in a deal that includes HBO – a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix.
Walt Disney is hoping to close on a deal to buy prized entertainment franchises from 21st Century Fox to feed into a video streaming service Disney will debut next year.
Apple, the world’s most valuable company, is spending about one billion dollars (£750 million) on original programming for a video service of its own.