Share Price of Netflix Drops Following Disappointing Second Quarter Results

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The share price of Netflix, the Wall Street darling, slumped by 14 percent in after-hours trading, all thanks to a series of lacklustre results for the company’s second quarter.

The website added 5.2 million subscribers globally in the three months to June, approximately a million fewer than was it had forecasted.

In a letter to its shareholders, Netflix said that the company had overestimated the rate of new shows that are being added to the platform over the quarter, however, it said that it remained confident that this would not have an effect on its long-term growth.

Even though analysts said that the news was not surprising given the hot competition in the sector from rivals such as Hulu and Amazon, most of them attributed the disappointing results down to it being off-season for most of its popular shows, including the Crown, and the prevalence of live TV events such as the World Cup.

Paolo Pescatore, a tech analyst, stated: “This latest quarter underlines my belief that Netflix needs subscribers and it needs them fast. It is still growing, but not quickly enough in light of its growing costs.”

He added: “Typically, this is always a challenging quarter due to seasonality. This might have a further negative impact on its third quarter results.”

The total revenue for the period was $3.91 billion (£2.9 billion), at a yearly growth of 40.3 percent. The analysts had expected revenue amounting to $3.94 billion.

Before markets closing, the stock of Netflix had doubled year-to-date and was the second-best performing member of the S&P 500.

Paul Verna, the principal analyst for Emarketer, suggested that things may be more positive for the streaming site stateside, all thanks to shows such as Orange Is The New Black, House of Cards, and Stranger Things that are set to release new seasons in the coming months.

Verna stated: “Despite the weak quarter, and a lowered outlook for the third quarter, Emarketer expects Netflix to remain the clear leader among video streaming services in the US. Netflix has a strong slate of original content that should keep it in the forefront among streaming services, and it plans to continue outspending the competition to develop TV programming and feature films.”

He added: “This is critical in an era when people increasingly choose streaming services on the strength of their content.”