Netflix share price falls as spending rises

Netflix share price falls as spending rises

Netflix added 1.53 million new domestic subscribers compared to forecasts of 1.5 million.

For the first quarter, Netflix is forecasting earnings of United States dollars 56 cents on revenue of USD 4.49 Billion. The forecast for current-quarter sales also missed estimates.

Shares of the company fell as much as 4.6 percent to $336.73 in early trading and were on track for its worst day in 2019.

The company released its massively popular dystopian movie "Bird Box" late in the fourth quarter, which helped attract a record 8.8 million new paid streaming customers in the period, but investors appear to have factored that into their valuation, pushing Netflix shares up more than 50 percent since late December. In Q4 the company added 8.8 million members (1.5m in the USA and 7.3m internationally), a jump from the projected 7.6 million.

The company previously reported that 45 million household had watched the film in the first seven days after release.

"Management is taking a cautious tone", said Geetha Ranganathan, an analyst at Bloomberg Intelligence. The light subscriber forecast is partly the result of the price increase Netflix announced Tuesday.

So compelling that Netflix is embarking on what is likely to be its 4th successful price increase in the last five years. The company's long-term programming budget stood at $19.3 billion at year end, up from $18.6 billion three months earlier.

A billion hours of television content is watched daily in the U.S., and Netflix accounts for about a tenth of it, according to co-founder and chief executive Reed Hastings.

The Netflix logo is seen on their office in Hollywood, Los Angeles, California, U.S. July 16, 2018. The two shows are on pace to be viewed by more than 40 million accounts in the first four weeks of viewing.

For the year, Netflix expects negative cash flow of about US$3 billion, in line with the year just ended.

The company said it had expected its margin to dip because of the number of shows that launched in the quarter.

Previously, Netflix had continued to offer a basic, $8-a-month streaming plan while raising rates on more comprehensive plans with better video quality and options to watch simultaneously on different devices. The company believes that global markets will one day account for as much as 90 percent of its customer base.

Similarly, Netflix said its original series "You", a series that flopped on Lifetime but was available on Netflix everywhere else in the world, was picked up by Netflix for an exclusive second season. It sees net income of $253 million for the first quarter, well below analysts' average estimate of $371 million.

But after the company's earnings on Thursday, the firm's analysts lifted their price target and said they would reconsider their "underperform" rating should Netflix's cash burn stabilize. Its revenues grew by 35% year-on-year to $16bn, while its operating profits almost doubled to $1.6bn.

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