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Netflix Shares Drop as the Subscriber Predictions Miss Estimates

Netflix Inc., the Streaming video service forecasts that the U.S. & the international subscriptions would grow at slower pace than what the Wall Street had expected this quarter, sending its shares sinking 8% in after-hours trading on Monday.

Netflix stated that it expected to add around 500,000 customers in US in 2nd quarter ending in June, compared to the Wall Street targets of 586,000. The prediction includes a “modest impact” from opening of a price upsurge for its monthly movie & the TV subscription service, said the company.

Netflix, that is known for its original shows including “House of Cards” & “Orange is the New Black”  said that it had expected to add over 2 million subscribers in the markets outside US, versus the analyst expectations of 3.5 million. It also stated the results for 1st quarter, when the subscriptions outstripped its own target.

Netflix is predisposed to large stock price fluctuations as the investors bet on possible success of its operation to redefine the TV viewing around the globe.

Company’s long-term results are determined by on how fast & profitably it grows. Netflix has been launched in nearly every country, at a significant cost, and now faces the job of acclimatizing the service to the different markets & cultures as the competitors also rush in.

Earlier this year Netflix, went live in over 130 countries, a huge global push by the Chief Executive Reed Hastings to counter the slowing growth in US.

The Initial sign-ups were restricted in some countries because service at the moment offers only English-language content and doesn’t accept all the local payment options.

“Over the next couple of years as we further localize, we will be able to see more opportunity,” said Hastings.

Netflix hasn’t yet launched in China. However the company said that it is “continuing discussions” & that “whatever we do,” the Chinese market’d have only a modest financial effect near-term.

Netflix had formerly promised the “material” global profit next year as it begins to reap benefits of its costly expansion. A representative said that the company is sticking with that prediction.

“I think people who relied on unbridled international growth are beginning to have 2nd thoughts, and the company now faces domestic competition that may limit its ability to grow domestic profitability,” said Michael Pachter, the Wedbush Securities analyst.