- Shares fall over 7% to $477
- New subscriber numbers hit nearly six million
- Revenue and outlook disappoint
Despite Netflix (NFLX: NASDAQ) adding nearly 6 million new subscribers in the second quarter of 2023, the streaming platform’s shares fell over 7% to $477 after revenues missed analyst estimates.
The share price fall comes in contrast to the 61% rise year-to-date, reaching a 52-week high on 18 July ahead of its second quarter earnings release.
Quarterly revenue rose 2.7% from $7.97 billion a year earlier to $8.2 billion but missed analyst forecasts of $8.3 billion, while net income climbed to $1.49 billion from $1.44 billion in the year-ago quarter.
The company estimated third-quarter revenue would hit $8.5 billion against Wall Street forecasts of $8.7 billion.
NEW SUBSCRIBERS
On the plus side, Netflix said it added 5.9 million new customers from April through to June, way ahead of expectations of 1.9 million additions, showing that its recent crackdown on password sharing was beginning to work.
As of the end of 30 June 2023, Netflix has a total of 238.4 million subscribers worldwide.
However, the outlook remains cloudy not only due to stiff competition from other streaming platforms but also due to the ongoing Hollywood actors’ and writers’ strikes which could cause Netflix to halt production of many of its film and television shows.
Netflix co-chief executive Ted Sarandos said: ‘This strike is not an outcome that we wanted. We make deals all the time. We are constantly at the table negotiating with writers, with actors, and producers, with everyone across the industry.’
Analysts have since come forward to reassure investors that Netflix has a global production team – so not US-focused – so it won’t be as badly hit by production issues, although time will tell.
EXPERT VIEW
Danni Hewson, head of financial analysis at AJ Bell said: ‘The good news for Netflix is its crackdown on password sharing has had the desired effect. Rather than abandoning the streaming platform, people have been joining in numbers.
‘The bad news is the company reported softer revenue. Netflix had effectively told investors to focus on how much money the business was generating rather than subscriber numbers by no longer guiding on the latter.’
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Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Sabuhi Gard) and the editor of the article (Ian Conway) own shares in AJ Bell.
