Netflix shares drops 6.78% to 491.64 dollars in the second quarter of 2020. The streaming platform said it had registered for the second consecutive quarter more than 10M new subscribers. But investors are disappointed with the company’s forecast for the third quarter. It expects, quarterly recruitment of 2.5 million new subscribers, far less than the anticipation of analysts of 5.4 million.
Netflix announced that it had attracted nearly 10.1 million paying subscribers worldwide in the second quarter of 2020 against an analyst estimate of 8.21 million and a company forecast of 7.5 million. On the other hand, the American giant published adjusted earnings per share of 1.59 dollars, below the FactSet consensus of 1.82 dollars.
Quarterly sales, meanwhile, stood at 6.15 billion dollars, where analysts expected 6.08 billion.
Side analysts, UBS highlight the recruitment of subscribers above its anticipation of 9 million. He adds that the balance of free cash flow for the 2020 financial year should be reached. The company previously anticipated an FCF of -1 billion dollars or better.
The analyst also highlights that the company’s management expects a return to negative free cash flow in 2021 due to the growth in content spending.
UBS now expects 2.8 million new subscribers in the third quarter against +5 million in its previous note. Quarterly revenues and Ebitda are also going downwards with 6.3 billion dollars and 1.4 billion respectively against 6.7 billion and 1.5 billion previously.
The design office lowers its target price from 535 to 500 dollars and maintains its Neutral opinion.
Netflix shares decline after the quarterly release
The group, which has promoted Ted Sarandos, to the rank of co-managing director, delivered somewhat disappointing prospects last night.
Revenues for the second fiscal quarter amounted to $ 6.15 billion. It exceeded market consensus due to the effect of containment measures. When it comes to shares, the share price is at $ 1.59, however, missed the market consensus. North America contributed significantly to the growth of new customers (2.94 million new customers in the USA and Canada), ahead of the EMEA (2.75 million) and Asia (2.66 million).
Be that as it may, the operators are worried about some of the group’s potential growth slowdown. Reed Hastings certainly has a talented co-director now, but the objective provided last night in terms of subscriptions disappoints. The group intends to win 2.5 million new customers in the third quarter. But analysts expected more than 5 million additional subscribers.
In the second quarter alone, Netflix had recovered 10.1 million new paid subscribers, against 8.3 million consensuses. The group thus ended this second quarter with a total of nearly 193 million subscribers.
The market reaction is negative to these announcements, taking into account the recent stock market performance. The share quoted around $ 300 in March, before flaming up to $ 527. Therefore, profit-taking was legitimate. Especially since some remain worried about the increased competition from Disney, Apple, NBCUniversal, WarnerMedia, or even TikTok.