Despite reporting Q2 subscriber rates that missed expectations, most analysts think Netflix's growth trajectory will improve sooner or later.
The company reported in its Q2 letter to shareholders on Monday that it added 1.7 million subscribers, a steep drop from its forecast of 2.5 million. The U.S. added 160,000 subscribers compared to projection of 500,000, while international subscriber additions totaled 1.5 million compared to the 2.0 million forecast. The stock, already down year-to-date, sank in after-hours trading, dropping more than 15 percent, prompting CEO Reed Hastings to apologize in a Monday conference call with investors.
"We apologize for the volatility. I know it's not easy on everyone. The big picture is very much intact and we're very excited about it, so we're continuing to execute on growing the business," Hastings said.
The company said that while total additions were on target, the unsubscribing rate was "up slightly and unexpectedly." Netflix claimed the churn was tied to press coverage in April around its plans to raise prices for long-term members, saying that consumers thought the price effect would occur immediately instead of over a longer period. (The price increase should be completed by the end of the year, the company said on its earnings call.)
Despite missing its guidance, Netflix's quarterly earnings beat expectations. It posted second quarter earnings of 9 cents per share, compared to 6 cents per share year over year. Revenue was at $2.11 billion, compared to $1.65 billion the year prior.
Thompson Reuters consensus estimate was $2.11 billion in revenue, with the company expected to post earnings of 2 cents a share.