On July 16th, shares in the leading Internet television network Netflix plunged 9% in the wake of its Q2 financial statement being issued and confirmation of weaker than expected profits.
According to the statement, Netflix sales were up to US$6.15 billion with its earnings per share (EPS) at $1.59 per share issued, compared to analysts’ expectations of $6.08 billion and $1.81 respectively.
The global COVID-19 pandemic in recent months spurred the stay-at-home entertainment boom, with burgeoning demand for new movies and TV shows benefitting Netflix to the tune of 26 million new subscribers in Q1 and Q2, – a figure almost equal to the 28 million new subscribers for the whole of 2019.
However, the streaming giant illustrated a noticeably pessimistic attitude toward its quarter three ambitions with Netflix expecting to earn $ 2.09 a share on sales of US$ 6.33 billion compared to analysts forecasting earnings of $2.01 a share on sales of $6.4 billion.
Netflix has also forecast an additional 2.5 million new subscribers to its service for the current quarter, less than half the number predicted by analysts’ at 5.8 million.
“Growth is slowing as consumers get through the initial shock of coronavirus and social restrictions” the company said as Netflix set forth its plans in an earnings letter to shareholders.
With these worrisome forecasts released, shares of Netflix (NFLX) plunged 9.5% to $477.15 in after-hours trading while it also plummeted 0.79% to $527.39 in intraday trading.
And as if things were not bad enough, a range of big name entertainment companies such as Disney, Warner Media and NBCUniversal as well as two tech giants – Apple and Amazon – are working towards introducing their own streaming services.
Meanwhile, Netflix it appears also regards social media as a huge threat, but has said “Instead of worrying about all these competitors, we (will) continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers. Our continued strong growth is a testament to this approach and the size of the entertainment market” in a bid to demonstrate its self-confidence in its strategy, as well as to justify its position in the market.
The company has also announced the suspension of original film production due to the pandemic, but that this won’t affect its progress in 2020.
Instead, more planned projects will be postponed until 2021, contributing to a higher overall yield of original films than will be seen by the end of 2020.
Netflix also plans to acquire other TV programs and movies to remedy its supposed deficiency in original content broadcasting.