I think Netflix needs to take some corrective actions before they plunge too deep in financial mess. Actually lot of it was already projected due to expansions in newer markets. What is new is slow growth rate of new subscribers and bigger attrition of DVD-by-mail business.
In my view they should do following tactical initiatives while they continue to focus on bigger grander vision of providing entire world with all the possible media streams..
Netflix is great company and in all probability they will survive this storm. I can't predict if this is right time to buy their stock or sell. But they will be there for sure.. Question is, will they thrive like old days or just survive and grow slowly to be ultimately eaten up by some other big fish..
JUSTIN SULLIVAN/GETTY IMAGES ARCHIVES
Netflix profit fell 91 percent in the quarter, and it warned it may fall short of the 7 million new streaming customers it had projected for the year.
But it was up from the first quarter, when the company posted a loss of $4.6 million, or 8 cents a share, a rare trip into the red for Netflix.
The company’s sales in the second quarter were up 13 percent from the year-ago period to $889.2 million.
The results topped Wall Street’s expectations. On average, analysts polled by Thomson Reuters were expecting the company to earn 5 cents a share in the quarter on sales of $888.9 million.
But the company clearly faced challenges. Its international business posted an $89 million segment loss in the quarter, helping to bring down its overall results. Netflix also continued to shed DVD subscribers. The total number of DVD customers fell to 9.2 million by the end of the quarter, down 850,000 from the previous period. The company has lost about 5.8 million DVD customers since last summer, when it raised prices as much as 60 percent and announced — and then canceled — a move to rename and spin off that business.
Despite those subscriber losses, Netflix’s DVD business posted a $133.8 million segment profit in the quarter. The U.S. streaming business, which now has 23.9 million customers, posted an $83.1 million profit.
Netflix doesn’t include technology, development or administrative costs when it calculates the segment profits of its business divisions. If those costs are included, Netflix’s U.S. streaming business would probably show a minuscule profit, if it was able to show one at all, Pachter said.
Netflix forecast that it would add 1 million to 1.8 million U.S. streaming subscribers in the third quarter but said that it would have to hit the top of that range to be on target for its annual goal.
In a statement, CEO Reed Hastings and Chief Financial Officer David Wells touted the company’s return to profitability in the second quarter, noting that Netflix’s results exceeded the guidance they gave last quarter. They also argued that the company’s international expansion, which led to the company’s loss in the first quarter and could lead to losses in the next two quarters, is the best thing for Netflix’s long-term business.
“We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television,” Hastings and Wells said in the statement. We are making progress in every market we serve, and see a oncein- a-generation opportunity ahead to build the world’s most popular TV show and movie service.”
In the current period, the company expects its bottom line to range from a loss of $6 million, or 10 cents a share, to a profit of $8 million, or 14 cents a share. It forecast sales ranging from $890 million to $911 million. Before the report, analysts had forecast that Netflix would earn 11 cents a share in the third quarter on sales of $905.9 million.
Contact Troy Wolverton at 408-840-4285.
In my view they should do following tactical initiatives while they continue to focus on bigger grander vision of providing entire world with all the possible media streams..
- New Class of Subscribers - Get more subscribers in College campus by limiting not only number of simultaneous streams any account can view but also, limit the number of different locations simultaneous or otherwise.. That should stop account sharing in college campus and will force lot of new subscribers. $10/month is not a big deal for college grads it is just that it is so easy to share Netflix account it simply doesn't make any sense to pay. Disclaimer: this is based on the rumors I have heard. I haven't actually seen it yet. They can easily do it by minor enhancements on tracking IP address of clients and possibly some other ways as well..
- Roam-ability - It is big bummer that when you travel, you can't watch Netflix as you are outside US. They should give some kind of ability to select portable devices of users to be able to view content while traveling outside US. They can charge little bit of premium for it or not.. At least I won't mind paying few extra bucks if they let me watch it on my laptop while I am travelling international. Though, I don't know how many users will care about this feature.. but definitely, it will remove big pain point for many.
- They need to stop treating DVD by mail as second class citizen in their company. It was their foundation and still is a great cash cow for them. Nobody treats your "Present" so bad for the sake of better "Future". As long as it doesn't generate loss for them, they should continue to push it harder. I would still love to have DVD by mail service. It was so convenient and you could watch lot more and better movies at better quality without worrying about internet speed or while traveling or camping or anything.. Netflix is in Media Streaming business.. they shouldn't care about Physical Media.. They did grave mistake of first offering streaming for free to DVD by mail customers and then start charging it separately. At least I can't understand it.. They could have created separate category of Premium streaming or some other category.. They could have stopped adding more content in this free version of streaming to push their premium Streaming version or they could have simply hiked prices like a dollar or two.. but that was ridiculous thing they did.. okay.. it was done.. but still before they go to graveyard.. they can rectify and come up with better DVD by mail plus streaming option with mid point pricing of yesterdays and today..
Netflix is great company and in all probability they will survive this storm. I can't predict if this is right time to buy their stock or sell. But they will be there for sure.. Question is, will they thrive like old days or just survive and grow slowly to be ultimately eaten up by some other big fish..
STOCK PLUNGES
Investors punish Netflix’s Q2 results
Subscriber growth less than projected, outlook may point to losses
By Troy Wolverton
twolverton@mercurynews.com
LOS GATOS — Netflix’s stock plunged more than 16 percent in late trading Tuesday after the company posted weak subscriber growth and warned of future losses that call into question analysts’ forecasts for next year.
As part of its second-quarter report, which included a 91 percent drop in earnings, the Los Gatos company warned that it may not meet its previously stated goal of adding 7 million new U.S. streaming video subscribers this year, after adding a paltry 530,000 new subscribers in the second quarter. The company also warned that it might post losses in both its third and fourth quarters thanks to a costly international expansion of its streaming video business.
Thanks to those losses, Netflix’s bottom line is likely to finish somewhere around break even for the year, said Michael Pachter, a financial analyst with Wedbush Securities. Meanwhile, the company continues to lose subscribers to its DVD-by-mail business, which provides the bulk of its profits.
Combine those two factors, and it’s unlikely that the company will meet Wall Street’s expectations of a $2.13 per-share profit for next year, Pachter said. And if it can’t hit that target, its price has to come down, he said.
In after-hours trading, Netflix’s stock was down $13.39, or 16.7 percent, to $67.
“It’s becoming clear to people that $2 (profit) figure is fricking wrong,” Pachter said. “The company is overvalued. That’s why it’s down.”
The online movie company announced Tuesday it earned $6.2 million, or 11 cents a share, in its most recent quarter. That was down sharply from the $68.2 million, or $1.26 a share it earned in the same period a year earlier.
Investors punish Netflix’s Q2 results
Subscriber growth less than projected, outlook may point to losses
By Troy Wolverton
twolverton@mercurynews.com
LOS GATOS — Netflix’s stock plunged more than 16 percent in late trading Tuesday after the company posted weak subscriber growth and warned of future losses that call into question analysts’ forecasts for next year.
As part of its second-quarter report, which included a 91 percent drop in earnings, the Los Gatos company warned that it may not meet its previously stated goal of adding 7 million new U.S. streaming video subscribers this year, after adding a paltry 530,000 new subscribers in the second quarter. The company also warned that it might post losses in both its third and fourth quarters thanks to a costly international expansion of its streaming video business.
Thanks to those losses, Netflix’s bottom line is likely to finish somewhere around break even for the year, said Michael Pachter, a financial analyst with Wedbush Securities. Meanwhile, the company continues to lose subscribers to its DVD-by-mail business, which provides the bulk of its profits.
Combine those two factors, and it’s unlikely that the company will meet Wall Street’s expectations of a $2.13 per-share profit for next year, Pachter said. And if it can’t hit that target, its price has to come down, he said.
In after-hours trading, Netflix’s stock was down $13.39, or 16.7 percent, to $67.
“It’s becoming clear to people that $2 (profit) figure is fricking wrong,” Pachter said. “The company is overvalued. That’s why it’s down.”
The online movie company announced Tuesday it earned $6.2 million, or 11 cents a share, in its most recent quarter. That was down sharply from the $68.2 million, or $1.26 a share it earned in the same period a year earlier.
JUSTIN SULLIVAN/GETTY IMAGES ARCHIVES
Netflix profit fell 91 percent in the quarter, and it warned it may fall short of the 7 million new streaming customers it had projected for the year.
--------------------------------------------------------------------------------------------------------------------------------------------------------------
But it was up from the first quarter, when the company posted a loss of $4.6 million, or 8 cents a share, a rare trip into the red for Netflix.
The company’s sales in the second quarter were up 13 percent from the year-ago period to $889.2 million.
The results topped Wall Street’s expectations. On average, analysts polled by Thomson Reuters were expecting the company to earn 5 cents a share in the quarter on sales of $888.9 million.
But the company clearly faced challenges. Its international business posted an $89 million segment loss in the quarter, helping to bring down its overall results. Netflix also continued to shed DVD subscribers. The total number of DVD customers fell to 9.2 million by the end of the quarter, down 850,000 from the previous period. The company has lost about 5.8 million DVD customers since last summer, when it raised prices as much as 60 percent and announced — and then canceled — a move to rename and spin off that business.
Despite those subscriber losses, Netflix’s DVD business posted a $133.8 million segment profit in the quarter. The U.S. streaming business, which now has 23.9 million customers, posted an $83.1 million profit.
Netflix doesn’t include technology, development or administrative costs when it calculates the segment profits of its business divisions. If those costs are included, Netflix’s U.S. streaming business would probably show a minuscule profit, if it was able to show one at all, Pachter said.
Netflix forecast that it would add 1 million to 1.8 million U.S. streaming subscribers in the third quarter but said that it would have to hit the top of that range to be on target for its annual goal.
In a statement, CEO Reed Hastings and Chief Financial Officer David Wells touted the company’s return to profitability in the second quarter, noting that Netflix’s results exceeded the guidance they gave last quarter. They also argued that the company’s international expansion, which led to the company’s loss in the first quarter and could lead to losses in the next two quarters, is the best thing for Netflix’s long-term business.
“We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television,” Hastings and Wells said in the statement. We are making progress in every market we serve, and see a oncein- a-generation opportunity ahead to build the world’s most popular TV show and movie service.”
In the current period, the company expects its bottom line to range from a loss of $6 million, or 10 cents a share, to a profit of $8 million, or 14 cents a share. It forecast sales ranging from $890 million to $911 million. Before the report, analysts had forecast that Netflix would earn 11 cents a share in the third quarter on sales of $905.9 million.
Contact Troy Wolverton at 408-840-4285.
No comments:
Post a Comment