Stocks fell over 14 percent for Netflix, the powerhouse streaming company, on Monday, but ended at being only five percent down by the close of Tuesday’s business day. Netflix reported that the company added fewer subscribers during its second quarter, and that’s what caused the drop. While analyst’s expectations showed that international subscriptions would take up five million customers, the reality presented just 4.47 new members, and new domestic memberships fell even lower with under a million new subscriptions over the last three months. The streaming juggernaut expected a growth of 6.2 million new members but reported just 5.2 million, which is the same number as last year’s second quarter.
During further investigation, Netflix has stated that the shortfall is just a second quarter that is seasonally weakened, and even partially caused by international and domestic audience distraction by FIFA’s World Cup. Netflix has also stated that they expect their third quarter subscription growth to reach five million, 4.35 of which is supposed to be new international memberships, with only 650,000 being in the United States.
Expert analysts in the field have narrowed the second quarter figures and even third quarter estimates to a hiccup in the business. They believe that given Netflix’s size, it still has an unremarkably massive opportunity to beat expectations, even if they are marginally smaller than previous models.
Concerning shares, Pivotal has downgraded Netflix’s target price by $65 to $435, which only suggests a limited upside. Additionally, Pivotal has also expressed concern over the amount of money that Netflix could spend during this fiscal year. Financial organizations such as J.P. Morgan have estimated that Netflix could spend up to $4 billion, regardless of subscriber numbers.
Despite the new member miss, Netflix still remains the king of streaming companies, with Hulu being a close second. While the second quarter subscription numbers were off, the revenue reports hit an impressive $3.9 billion USD, with a net income of $385 million USD. When looking at the net $66 million USD that got reported during last year’s second quarter, there doesn’t seem to be much to worry about, and it remains clear why their opportunity to fix the temporary dip in subscribers is large.
As Netflix continues to take on fan-favorite television shows and create original shows and movies that feature not only new and unrecognized talent, but also A-list celebrities such as Will Smith; the subscribers are going to come. Convenient entertainment and television shows and movies a la carte are the new cable. It’s possible that some just haven’t jumped on the bandwagon yet.