Streaming giant’s shares drop more than 10% after it missed Q2 subscriber growth projections by more than 2 million customers
Netflix’s ugly Wednesday bled into Thursday morning, with the streaming giant’s stock dropping more than 10% during its first hour of trading, less than a day after reporting it had fallen well short of hitting its second-quarter subscriber projections.
Netflix was trading at $324.43 per share in early-morning trading, marking a 10.5% decline from where it closed on Wednesday. The drop came after Netflix reported that it added only 2.7 million new customers during Q2 — more than 2 million less than Wall Street analysts and the company’s own projections had anticipated — and even saw a decline in U.S. subscriptions, with 126,000 domestic subscribers leaving the service. It was the first time in nearly a decade Netflix had lost customers in the States.
In its letter to shareholders, the company blamed its recent price hikes on the minor exodus.
Before its Q2 report, Netflix had traded as high as about $382 per share in recent weeks.
After adding its latest customers, Netflix now has 151.6 million global subscribers. Despite flopping on subscriber growth, Netflix did post better-than-expected earnings and its $4.92 billion in revenue essentially matched Wall Street estimates.
Tom Harrington, senior research analyst with Enders Analysis, said Netflix’s Q2 results were “concerning,” but added it’s likely a “minor blip” due to a lack of compelling shows that debuted or returned during the quarter. “In all likelihood there will be growth in the current quarter, with big returning original shows like ‘Stranger Things,’ ‘Orange Is the New Black,’ ‘Money Heist’ and ‘Mindhunter’ — something that “usually results in a boost,” Harrington said.
With heavy competition from Disney, Apple and WarnerMedia on the horizon, Netflix indicated that it’s willing to experiment with new subscriber tiers to drive customer acquisition. The company said in its letter to shareholders on Wednesday that it’s planning on launching a cheaper, mobile-only subscription in India this quarter — a market CEO Reed Hastings has placed an emphasis on in the past. Netflix will not consider advertising anytime soon, however, with the company saying remaining ad-free is a “deep part” of its identity.