Netflix (NFLX) shares fell 5.42% in after-hours trading (after closing 1% lower in the regular session) after the company reported additions to paid subscribers the missed estimates and lower guidance for the rest of 2020.
Revenue for the company’s third quarter was $6.44 billion against projections for $6.39 billion. Earnings, though, were $1.74 a share versus a projected $2.13 a share. The company added 2.2 million paid subscribers to its streaming services in the quarter. That was far lower than the 3.3 million Wall Street had expected. That figure missed even the 2.5 million additional subscribers the company had projected during the summer. And it marked a huge drop from growth earlier this year. In the first quarter Netflix added 16 million paying subscribers. In the second quarter the company added 10 million subscribers. In the third quarter of 2019 Netflix added 6.8 million subscribers.
For the fourth quarter, Netflix told Wall Street to expect growth of 6.0 million subscribers. That would miss earlier estimates for growth of 6.5 million and an addition of 8.8 million subscribers in the fourth quarter of 2019.
The miss is likely to rattle investors and traders because one of the big questions about Netflix’s astounding growth in the first half of 2020 was how much had been pulled from growth in future quarters as families flocked to streaming during various coronavirus lockdowns.
In addition Netflix has a lighter slate of new content for 2021 because the coronavirus pandemic has disrupted production for the year for shows scheduled to appear in 2021. In today’s earnings call the company said that it had already restarted production for some of its most-watched titles including a fourth season of “Stranger Things. The company said it expects that the number of Netflix originals will be up year over year in every quarter of 2021. (Of course, more originals means more spending on content and more pressure on earnings.)
Streaming competitor Disney (DIS) is scheduled to report earnings on November 7.
