The small crack in the level of confidence in the Megatech sector widened on Thursday when streaming video giant revealed a sharp fall in its forecast for new subscribers in the September quarter.
The shares fell more than 10% in after-hours trading, wiping over $US22 billion off the company’s valuation. By 7.15 am the fall had been trimmed to 9.9%.
S&P futures fell 0.7% or 200 points at 7 am Friday, Sydney time. That was after a 10 point or 0.32% fall in the S&P 500 in regular trading. The ASX 24 had a small rise of 19 points penciled in by 7.15 for today’s session.
The slide in Netflix shares fall came despite another blockbuster quarter with the addition of 10.1 million new paid subscribers and a significant jump in revenue. The rise in new subscribers topped all forecasts and the company’s own projection for as 7.5 million rise.
That pushed the total for the first half of 2020 to a massive 26 million, more than double the 12 million for the first half of 2019. It was just short of the 28 million total for all of 2019.
The company reported net earnings of $US720 million, with net income of $US270.7 million. Revenue jumped 25% to $US6.15 billion from $US4.92 billion a year ago.
But what took the market by surprise was the sharp pullback in estimated global subscriber growth for the current quarter of just 2.5 million.
Market forecasts had expected Netflix to add 8.26 million new subscribers in the June quarter. But the 10 million new subs took the total around the world to 192.95 million.
The 2.5 million net new subscribers forecast for the third quarter is not only a significant slowdown compared with previous periods and on Wall Street projections, but it is less than half the 6.8 million added in the third quarter of 2019.
It is also half what Wall Street had been expecting up to this release and that’s why the shares sold off in after-hours trading.
