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Netflix Edges Subscriber Target, But Earnings Disappoint

Internet television network Netflix (NFLX) late Tuesday beat analyst estimates for new subscribers in the second quarter. But the streaming video leader came up short on earnings. Netflix stock wavered in extended trading.




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The Los Gatos, Calif.-based company added 1.54 million new subscribers in the June quarter, vs. its target of 1 million. Wall Street had predicted 1.15 million new subscribers in the period, compared with 10.09 million in the year-earlier period. It ended the June quarter with 209.18 million subscribers worldwide.

Netflix faced difficult comparisons with last year’s numbers when it made huge subscriber gains amid stay-at-home orders during the early months of the Covid-19 pandemic.

For the current quarter, Netflix expects to add 3.5 million new streaming subscribers. However, Wall Street had been looking for Netflix to add 5.63 million new subscribers in the September quarter. In the same period last year, it added 2.2 million new subscribers.

Netflix Stock Wavers In Late Trades

In after-hours trading on the stock market today, Netflix stock initially fell but later turned positive. In recent trades, NFLX stock was up a fraction. During the regular session Tuesday, Netflix stock slipped 0.2% to 531.05.

“Covid has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through,” Netflix management said in a letter to shareholders.

Netflix earned $2.97 a share on sales of $7.34 billion in the second quarter. Analysts had expected Netflix to earn $3.18 a share on sales of $7.32 billion. On a year-over-year basis, Netflix earnings jumped 87% while sales rose 19%.

For the third quarter, Netflix expects to earn $2.55 a share on sales of $7.48 billion. Wall Street had forecast Netflix earnings of $2.21 a share on sales of $7.48 billion. In the year-earlier period, Netflix earned $1.74 a share on sales of $6.44 billion.

NFLX Stock In Consolidation Pattern

Netflix stock has been consolidating for the past 26 weeks with a buy point of 593.39, according to IBD MarketSmith charts.

The Asia Pacific region accounted for about two-thirds of Netflix’s subscriber gains in the second quarter. Meanwhile, paid subscribers in the U.S. and Canada region fell 400,000 in the period to 73.95 million.

Popular programming in the June quarter included fantasy series “Shadow and Bone” and “Sweet Tooth” and movies “Army of the Dead” and “Fatherhood.”

Covid-related production delays led to a lighter content release schedule in the first half of 2021, Netflix said.

The company’s third-quarter release slate includes new seasons of fan favorites “Money Heist,” “Sex Education” and “Virgin River.”

Netflix also confirmed plans to offer video games as part of its subscription service. Games will be offered to members at no additional charge. Netflix will initially focus on games for mobile devices.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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