Netflix subscriber slip hints at 'lumpy' road ahead

Netflix CEO Reed

Has the bubble finally burst on Netflix?

Netflix shares tumbled more than 14 percent in after-hours trading on Monday after the streaming giant missed its second-quarter growth forecast by more than a million subscribers.

Last night it was revealed in NY, that Netflix added 5.2 million users in the second quarter, about a million fewer than the company predicted.

For the current quarter, Netflix projected it would add 5 million customers. In the second quarter past year, it added 1.07 million USA subscribers and 4.14 global ones.

The company's earnings beat Wall Street's forecast, but sales were below targets.

In a letter to shareholders, Netflix (NFLX) said it had a "a strong but not stellar" second quarter. Yet while revenue rose more than 40 percent, it lagged the $3.94 billion analysts' had expected.

The Netflix logo is seen on their office in Hollywood, Los Angeles, California, U.S. July 16, 2018. It didn't add new seasons of its biggest hits, such as "Stranger Things", nor did a new show become a phenomenon.

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Though analysts said the news wasn't surprising given hot competition in the sector from rivals like Amazon and Hulu, most put the disappointing results down to it being off-season for its most popular shows, such as the Crown, and the prevalence of live TV events like the World Cup. Coming off its best back-to-back quarters for total subscriber growth in its history, Netflix fell short of subscriber estimates for the first time since Q1 2017.

Other firms are remaining bullish on Netflix.

Meanwhile, Apple - the world's most valuable company - is spending about $1 billion on original programming for a video service of its own. It brought in $3.91 billion in Q2 but was expected to earn $3.94 billion.

Looking ahead to the third quarter, the company is calling for $0.68 in EPS on $3.99 billion in revenue.

Netflix said operating margins would be narrower than previously expected because of the rapid strengthening of the US dollar, which appreciated by more than 5 percent against major trading partners' currencies in the second quarter.

Netflix has been paying up big time for its content. Netflix said Monday that it expects content expenses to hit $8 billion this year. Disney is selling an internet version of its sports network ESPN and plans to introduce a general entertainment video service next year. "Our strategy is to simply keep improving, as we've been doing every year in the past".

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