Netflix Stock Lost $500 Mark as Profits and Subscribers Fell Below Expectations

Netflix stock price fell below $500 mark after beating revenue estimates but falling short of earnings expectations and subscriber additions. Lower than expected guidance for the third quarter added to investors’ concerns. Shares fell more than 9% in post-market trading to around $480.

The largest online streaming company has added close to 10.1M global subscribers, up sharply from the company’s guidance of 7.5M global streaming net additions but down from analysts’ expectations for 12M.

Subscriber additions also fell compared to 15.8M additions in the first quarter. The company now expects to add just 2.5M subscribers in the third quarter, down substantially from expectations for 5M additions.

“We’re expecting paid net additions will be down year over year in the second half as our strong first-half performance likely pulled forward some demand from the second half of the year,” CEO Reed Hastings says.

Its second-quarter revenue soared 25% to $6.15B, beating the analyst’s estimate for $6.08B. Although the company generated solid earnings growth when compared to the previous year quarter, the earnings per share of $1.59 missed expectations for $1.83 per share.  

Netflix stock has gained significant value in the past couple of weeks amid hopes over robust subscriber additions and massive profits.

On the positive side, the company says they are working on margin expansion strategies to boost profits. The streaming company currently expects 2020 operating margin to stand around 16% while they plan to expand it to 21% in fiscal 2021.

Its cash flows also grew from previous periods amid lower cash outflow on production and marketing activities.

“We generally are forward-investing into the growth of our business and into the content so our content cash spend is in excess of our content expense in a given year,” the streaming company says.