Netflix Subscription Worries Hammer Shares
Netflix (NASDAQ:NFLX) stock fell 14 percent in extended trading after the company announced on Monday it expected online subscriber growth to slow down. The company’s first-quarter subscriptions, announced along with the earnings on Monday afternoon, met analysts’ estimates, but pessimistic future guidance ended up hurting shares nonetheless.
Netflix, the world’s largest video-subscription service, said it added 1.74 million new U.S. online subscribers to reach 23.4 million. However, it predicted that second-quarter growth will be slower, with domestic streaming subscriptions rising only to between 23.6 million and 24.2 million over the next three months. It expects and international subscriptions to go up to be between 3.45 million to 4 million. DVD subscriptions are predicted to fall to be between 8.95 million and 9.35 million.
Netflix has already been facing competition from Amazon.com (NASDAQ:AMZN), Time Warner’s (NYSE:TWX) HBO, and Hulu (NASDAQ:CMCSA). Now, Verizon’s (NYSE:VZ) online venture with Coinstar’s (NASDAQ:CSTR) Redbox is adding to its headache.
Sales in the first quarter rose 21 percent to $869.8 million for Netflix, beating most estimates. However, the net loss of $4.58 million, or 8 cents a share, came because the company has been spending on new content licensing, as well as on massive expansions in Latin American and U.K.
The company has commitments to spend $3.9 billion over the next five years on films and TV shows. The pressure to offset those costs and the bigger ones from overseas has fallen on revenue from domestic subscriptions. But experts have been worried that Netflix’s domestic streaming business may actually stall this year, and now the company has come out with negative expectations of its own.
Netflix fell 14 percent to $87.94 in extended trading. The stock has gained 47 percent this year.