Netflix Earnings: Stock Tanks on Weak Subscriber Adds

Netflix shares plunge in after-hours trade after forecast miss

That exceeded the 79 cents a share estimated by analysts polled by Factset.

The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., January 18, 2017.

However, investors appeared spooked by the missed subscriber forecast, causing shares to fall by 14 percent to $345.63 in extended trading Monday.

Commenting on the reaction of shareholders Eric Schiffer, chief executive of private equity firm Patriarch, said: "Investors are devastated by Netflix's Q2 projection that went down in dramatic flames". The reason behind this is that Netflix is now has a free cash flow of negative $559 million meaning they once again spent more in the second quarter of 2018 than they made.

While Wall Street remains overwhelmingly positive on Netflix and its role in video streaming globally, the numbers did raise question marks over future growth.

Netflix said operating margins would be narrower than previously expected because of the rapid strengthening of the US dollar, which appreciated by more than 5 percent against major trading partners' currencies in the second quarter. The company added 700,000 domestic subscribers during Q2, along with 4.5 million overseas, missing company and analyst estimates on both fronts.

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Last night it was revealed in NY, that Netflix added 5.2 million users in the second quarter, about a million fewer than the company predicted.

During the latest quarter, Netflix earned a profit of $384 million, or 85 cents a share, a gain of more than 481 percent from the $66 million, or 15 cents, it earned in the year-ago period.

The company will spend as much as $8bn on programming this year.

"As we head into the rest of 2018, we believe Netflix has a number of growth levers which should fuel the company's next phase of strategic penetration among both USA and especially global consumers despite some softness seen in 2Q", he wrote. For the first time, Netflix generated more revenue outside the U.S.: worldwide revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2. It is making a big push in India.

Hastings said the company would make adjustments to account for foreign exchange rates in order to "steadily" increase operating margins.

Netflix is expected to face increasing competition in the next year or two. And AT&T Inc has promised to boost investment in HBO after taking over the network in its Time Warner acquisition. But the landscape is increasingly looking more like an unbundled version of the old cable model-dozens of channels from Netflix to CBS to Showtime, each with their own monthly fee. "Our strategy is to simply keep improving, as we've been doing every year", the company said.

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