Today after the bell, Netflix reported the second quarter financial results. After the release of the second quarter numbers, the popular video streaming service has experienced a sharp drop in its value, with its shares down 10% in after-hour trading at the time of writing.
What happened to Netflix flying high, a company you might expect to report growth supported by the fact that many consumers in its home market are confined to their homes? The company not only failed to produce second-quarter numbers that investors were equally excited about, but also managed to predict weaker-than-expected performance.
Perhaps one of the two would have been acceptable, but not both. Here's what Netflix told us:
- Netflix Results: $ 6.15 billion in second quarter revenue generated operating income of $ 1.36 billion and net profit of $ 720 million. In terms of stock, the company made $ 1.59 in the three-month period.
Investors expected $ 6.08 billion in earnings and earnings per share of $ 1.81, according to averages of Yahoo Finance analysts. Hence, Netflix experienced a slight drop in revenue, but lost sharply in terms of profit.
The company also exceeded expectations in terms of net customer additions, with CNBC reporting that Netflix's 10.09 million new subscribers exceeded their 8.26 million estimates.
Not the worst results, right? To fully understand the correction in the company's share price, we will therefore have to look forward to what Netflix said about the third quarter:
- Netflix forecast: $ 6.33 billion in revenue leading to operating income of $ 1.25 billion and net profit of $ 954 million. In terms per share, the company plans to earn $ 2.09 in revenue.
The company also plans to add 2.5 million new net subscribers in the third quarter. As the market expected the company to generate $ 6.39 billion in revenue in the third quarter and $ 2.00 in earnings per share, we again have a slightly mixed picture. But the modest net subscriber adds tied to Netflix's slower-than-expected revenue growth that appears to have scared the way.
And with the fear in the air that Netflix's growth might fall below expectations, the share price has gone down. Perhaps the company is cautious with its net subscriber adding forecasts, but investors don't seem to want to give it the benefit of the doubt.
More as the earnings season makes its way.