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Netflix Misses Second Quarter Subscription Target, Stocks Drop By 11%

Netflix Misses Second Quarter Subscription Target, Stocks Drop By 11%
Streaming giant Netflix missed analysts estimates for paid streaming subscribers for the second quarter sending its shares down by as much as 11 per cent.
The company able to add just 2.83 million international paid streaming subscribers globally in the second quarter compared to the estimates of the Wall Street if about 4.8 million. The company has now missed the second quarter subscriber numbers thrice in the last four years, said Brokers Cowen & Co.
The disappointing results of the company raised concerns among investors as the share of the company dropped by 11 per cent in early trade in the United States. The investors were also reportedly worried over the signs of trouble in its U.S. base in addition to the lower-than-expected global growth numbers.
However, brokerage firms on the Wall Street maintained a positive outlook on Netflix Inc as they conveyed confidence on the ability of the company to mop up new subscribe numbers in the rest of 2019 because of a very strong content line up and would be able to reverse the shock losses in its US subscriber base that it witnessed in the second quarter.
The dip in shares however also forces six brokerages to cut their share price targets for the company but refrained from revision doing any lower side revisions on the ratings of the stocks. A majority of Wall Street brokerages still view Netflix to be possess high potential for growth and therefore kept a constant “buy” call on its stocks.
“The subscriber miss wasn’t unprecedented, though the international miss magnitude was greater than normal,” RBC Capital Markets analysts said. “But Q2 results do highlight the importance of a strong content slate and at least raise the question of whether NFLX needs to be more restrained with price increase pacing.”
Currently there are 151.6 million paid subscribers with the company and it had increased prices for its services in the second quarter in a number of markets including Britain, Switzerland, Greece and Western Europe.  
The users of the company have now come to expect strong original content every quarter, said analysts at Morningstar. But when the content is now well known or is weak, the company finds it harder to retain existing subscribers or to attract new subscribers in the wake of rising prices for subscription.
At the beginning of the third quarter, Netflix released its 1980s-set smash-hit “Stranger Things”. The company said that it would be followed by new seasons of “Orange is the New Black,” and “The Crown” in addition to the much awaited Martin Scorsese movie “The Irishman”
“We would note Netflix misses have been followed by strong quarters, and, along those lines, we expect Netflix’s very strong 2H slate will lead to a rebound in sub growth,” Credit Suisse analysts wrote in a client note.
During the third quarter, it would be able to gain 7 million subscribers globally, the company has forecast because it would be launching new seasons of hit Spanish-language series “La Casa de Papel” and the second season of Indian series “Sacred Games.”

Christopher J. Mitchell

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