Today after the bell, Netflix reported second quarter financial performance. After the second quarter figures were known, the popular video streaming service saw a sharp decline in value, with its shares falling 10% at the time of writing over the counter.
What happened to the high-flying Netflix, a company that you might have expected to see growth supported by the fact that many consumers in its home market are confined to their homes? Not only was the company unable to present Q2 figures that investors were looking forward to, but it was also predicting weaker performance than expected.
Perhaps both would have been acceptable, but not both. Netflix told us this:
- Netflix Results: Second quarter sales were $ 6.15 billion and operating income of $ 1.36 billion and net income of $ 720 million. In terms of stock, the company earned $ 1.59 over the three-month period.
Investors had expected sales and earnings per share of $ 1.81 of $ 6.08 billion, according to Yahoo Finance analysts. So Netflix has seen a slight drop in sales, but missed out on profits.
The company also exceeded expectations regarding the number of net customers. CNBC reported that Netflix's 10.09 million new subscribers exceeded the 8.26 million estimate.
Not the worst results, is it? To fully understand the company's stock price correction, we need to look ahead to what Netflix said about the third quarter:
- Netflix forecasts: Sales of $ 6.33 billion resulted in operating income of $ 1.25 billion and net income of $ 954 million. The company expects sales of $ 2.09 per share.
The company also expects to attract 2.5 million new net subscribers in the third quarter. With the market expecting the company to generate $ 6.39 billion in sales and earnings per share of $ 2.00 in the third quarter, we again have a slightly mixed picture. But the modest net subscribers associated with Netflix's slower-than-expected revenue growth seem to have scared the road.
And with the fear that Netflix's growth could be below expectations, the share price declined. Perhaps the company's forecast for adding net subscribers is conservative, but investors didn't seem to want to give the benefit of the doubt.
More than the winning season is gaining momentum.