Netflix shares tank after big miss on subscriber growth

Netflix shares plunge in after-hours trade after forecast miss

Netflix stock is now in a free fall in after-hours trading.

Netflix predicted it will add 5 million subscribers in the current quarter, which ends in September, slightly slower than the pace a year ago. Internationally, the company added 4.47 million new subscribers, short of its guidance for 5 million.

Despite the subscriber miss, the company's second quarter revenue was $3.9 billion U.S. and its net income was $384 million United States, up from last year's second quarter net income of $66 million.

With all this, the stock is tanking.

Calling the quarter "strong but not stellar", Netflix boss Reed Hastings cited hurdles such as increased competition from YouTube, HBO, Disney, Amazon and Apple, as well as foreign currency fluctuations as the streaming giants accelerates its global business.

Netflix has 130 million subscribers globally.

Before the earnings report, Netflix shares had gained 109 percent, making it the second-strongest performer on the S&P 500 index.

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Netflix said it added just 670,000 subscribers in the US for the period ending in June, about half of its own projection of 1.2 million. Its total base of 57 million subscribers in the USA dwarfs Hulu's 20 million users and HBO's 5 million.

The good news is Netflix did see a 43% increase in streaming revenue likely from the higher subscriber numbers and new price increase. It also fell short on total revenue.

Boosted by the success of its original shows such as "13 Reasons Why", "House of Cards" and "Orange is the New Black", Netflix had beaten subscriber growth expectations in seven out of last 10 quarters. Worldwide revenue for the recent quarter is US$1,921 million, compared to US$1,165 million in 2017. Netflix has borrowed money repeatedly to pay for its programming, and expects to spend between $3 billion and $4 billion more in cash than it will generate in 2018.

AT&T just bought Time Warner for $81 billion in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix.

Netflix said Monday that it expects more competition, but dismissed any potential negative impact on its business.

Disney is also planning its own streaming service, which is expected to launch in 2019. "Our strategy is to simply keep improving, as we've been doing every year in the past".

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