Netflix shares plunge as subscriber forecasts miss estimates

Mon Apr 18, 2016 7:47pm EDT
 
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By Anya George Tharakan and Lisa Richwine

(Reuters) - Streaming video service Netflix Inc forecast U.S. and international subscriptions would grow at a slower pace than Wall Street expected this quarter, sending its shares tumbling 8 percent in after-hours trading on Monday.

Netflix said it expected to add about 500,000 customers in the United States in the second quarter that ends in June, compared with Wall Street targets of 586,000, according to FactSet StreetAccount. The forecast includes a "modest impact" from the beginning of a price increase for its monthly movie and TV subscription service, the company said.

The company known for its original shows including "Orange is the New Black" and "House of Cards" said it expected to add about 2 million subscribers in markets outside the United States, versus analyst expectations of 3.5 million, according to FactSet. It also reported results for the first quarter, when subscriptions outpaced its own target.

Netflix is prone to large stock price swings as investors bet on the possible success of its mission to redefine television viewing around the world.

The company's long-term results depend in large part on how fast and profitably it expands. Netflix has launched in almost every country in the world, at a substantial cost, and now faces the task of adapting the service to different markets and cultures as competitors also rush in.

In January, Netflix went live in more than 130 countries, a huge global push by Chief Executive Reed Hastings to counter slowing growth in the United States.

Initial sign-ups were limited in some countries because the service at this point offers only English-language content and does not accept all of the local payment options, Hastings said on Monday.

"Over the next couple years as we further localize, we'll be able to see more opportunity," Hastings told analysts on a conference call.Netflix has not yet launched in China, where it has been exploring an entry for some time. It said on Monday it was "continuing discussions" and that "whatever we do," the Chinese market would have only a modest financial effect near-term.   Continued...

 
The Netflix logo is shown in this illustration photograph in Encinitas, California October 14, 2014.  REUTERS/Mike Blake