Netflix Inc. (NFLX) - Get Report shares saw their biggest one-day decline in some three years Thursday after the streaming service said it lost U.S. customers and added fewer-than-expected new subscribers in markets around the world as prices increased and competitors began to move into the online entertainment space.
NFLX shares tumbled $37.25, or 10.3%, to close at $325.21.
Netflix said earnings for the three months ending in June, its fiscal second quarter, came in at 60 cents per share, down 30% from the same period last year but 4 cents ahead of the Street consensus forecast. Group revenues rose 26% to $4.923 billion, Netflix said, a figure that fell largely in-line with analysts' forecasts.
Netflix said its U.S. subscriber base fell by 126,000, the first quarterly decline in eight years, while it added just 2.83 million global customers, well shy of the 4.8 million expected by analysts the cover the group, which the company put down to recent price increases and its original content offering.
Looking into the third quarter, Netflix said it expects revenues of $5.25 billion, with global streaming paid additions of 7 million, but noted "fierce" competition for new and existing users in the growing online television space.
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"When we're forecasting in the beginning of the quarter, we make our best estimate. And as you can see over the past 3 years, sometimes we're forecast high, sometimes we forecast low," CEO Reed Hastings said during an interview with one investor late Wednesday evening. "This is one where we forecasted high."
"I think our position is excellent," he added. "We're building amazing capacity for content. Our products have never been in better shape. Our rate of investment is extremely high. So if investors believe in Internet television, which I think is an easy one to get there, then our position in that market is very strong."
Netflix shares were marked 9% lower at the start of trading Thursday to change hands at $328.79 each, the lowest since late January and a move that would reduce the stock's year-to-date gain to around 22%.
"The 2Q subscriber shortfall will fuel the debate about US pricing power and the role of new content to drive net adds. And the negative QoQ US decline combined with Disney+'s approaching US launch, make this more than just the usual once-a-year debate after a quarterly miss," said BMO Capital Markets analyst Daniel Salmon, who carries an 'outperform' rating on the stock with a $440 price target.
"But early 3Q guidance suggest this is still likely a short-term wobble. We see the long-term trend as largely on track (especially the broader revenue trend), and recommend (Netflix, Amazon (AMZN) - Get Report and Disney (DIS) - Get Report ) as a collective investment in the global streaming race" he added.