Netflix forecast misses Wall Street view, shares dip

Netflix forecast misses Wall Street view, shares dip

Darren Sullivan
January 20, 2019

In the first nine months of 2018 alone, Netflix spent $8.5 billion in cash on streaming content, an investment that will pay off in the long run as long as the company continues to grow its global subscriber base.

The company's stock price didn't react well to the news, dropping as much as 4.6% on Friday.

Better than expected especially in the regions outside of the American home market, where Netflix won 7.3 million additional customers. The company saw 8.8 million paid net additions, higher than Wall Street's expectation of 7.6 million.

The streaming giant posted revenue of US$4.19 billion in the period, compared with a US$4.21 billion projection from analysts.

There are 58.49 million subscribers in the USA alone for Netflix, up almost 6 million from a year ago.

Netflix added an unprecedented 781 hours of US original programming in the United States during the quarter, according to Cowen & Co analysts, including drama series "Narcos: Mexico" and holiday films such as "The Christmas Chronicles".

The company estimates earnings per share of 56 cents on revenue of $4.49 billion, lower than Wall Street expectations of 82 cents and $4.61 billion.

Netflix announced a hike in its subscription fees.

Management said domestic average selling price will "improve over the course of the year" and result in revenue growth for 2019.

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Netflix increased the prices of all three of its United States plans on Tuesday, some by as much as 18%, which makes this the most substantial price jump since the streaming service debuted in 2007.

Ted Sarandos, Netflix's chief content officer, talked in an investor interview following the release of results.

But the streaming company has said it will ensure no future productions on its platform use images of the disaster for entertainment, according to Lac-Megantic Mayor Julie Morin, who spoke to a Netflix representative Thursday.

Netflix's growth in the U.S has slowed considerably in recent years as it has saturated the market.

Few days before Netflix's earnings, the Company raised its subscription price again.

Concerns about the stiffening competition and Netflix's ability to sustain its current leadership in video streaming has caused the company's stock price to slide by 21 percent from its peak of $423.21 reached last June. AT&T's WarnerMedia unit plans a broader streaming service this year centered on HBO.

Worldwide hits are also receiving impressive viewership numbers with Spanish original Elite watched by 20 million member households around the world in its first four weeks.

Even more detailed statistics were provided from Netflix including its US market share of 100 million hours of viewing per day.

It's unclear if Netflix is in the "beginning of the end" stages of its growth cycle or "end of the beginning", Martin said.