Netflix shares slide as it misses revenue estimates despite profits bump
Shares in Netflix fell as much as five per cent in after-hours trading last night, after the streaming giant missed analyst estimates on revenue and paid subscriber growth.
Netflix reported $4.19bn in revenue for the three months to the end of December last year, narrowly missing the $4.21bn predicted by consensus estimates, as collated by S&P Global Market Intelligence.
It added a record 8.84m paid subscribers globally in its fourth quarter, but failed to meet analyst expectations of 9.18m additions.
Netflix said it expects to add 8.9m subscribers in its current quarter, after having raised prices for its subscription packages in the US earlier this month by as much as 18 per cent.
However investor fears were mitigated as it raked in earnings before tax of $119.4m, beating expectations of $105.1m by more than 13 per cent.
Read more: Netflix shares rise as subscribers face an 18 per cent price hike
Much of Netflix's growth has been fuelled by its heavy investment into producing original content, including award-winning shows such as The Crown, Stranger Things and Bird Box. The firm said it had planned to spend $8bn on original content last year, $1bn more than it had done in 2017.
"Netflix's results are broadly positive with its streaming service continuing to gain popularity, as is evident from its strong net additions globally," said Haris Anwar, senior analyst at Investing.com.
"But results won’t push its stock higher from here, with most of the good news already priced in after a massive rally earlier this month… While its global subscription base is surging, the company’s growth in the US is flattening. That’s one indicator that shows Netflix will have to spend a lot in creating local content which resonates with that specific local audience."
2019 is poised to be a difficult year for Netflix, as rivals and cable providers alike prepare to launch their own streaming services which could take away from the amount of third-party content available on the platform.
US broadcasting giant NBC revealed earlier this week that it will launch a streaming service in 2020, while Apple, IMDB and Disney are also expected to join in the chorus.
Read more: South Korean broadcasters team up to create Netflix rival
Tech analyst Paolo Pescatore told Morning Wire the results were "a modest quarter to end a mixed year for Netflix", despite the usually busy festive season.
"There will come a point that Netflix needs to diversify and offer a broad range of services," he said.
"The market will be awash with video services. Users will be spoilt for choice, maybe a bit too much."