Netflix shares fall following weak first quarter forecast

Streaming giant Netflix saw its share price fall by 5 per cent on Friday as investors were disappointed by the company’s lower-than-expected revenue forecast for the first quarter.

Netflix’s shortfall in revenue expectations overshadowed its record number of subscribers as investors hoped for a bigger payoff having increased prices for US customers by up to 18 per cent.

“Many investors we spoke with in recent days expected the price increase to flow through to improved free cash flow guide. That didn’t happen,” Bernstein analysts wrote in a note to clients.

The company’s shares fell by as much as 4.6 per cent to $336.73 in early trading and was on track for its worst day in 2019.

Despite this, the video streamer’s stock has still seen more than a 30 per cent surge this year and was recently trading shares at 83 times expected earnings for the next 12 months.

Netflix has shown huge growth in the last few years, spending billions of dollars to attract a global audience.

That growth has come at the cost of a rising debt that was as much as $10.36bn at 2018’s end, rising from $3.36bn in 2016.

The US-based company claims free cash flow this year will be similar to 2018 but expects to see improvement each year thereafter.