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Home / Business / Netflix shares down 11%, analysts continue to see growth

Netflix shares down 11%, analysts continue to see growth



(Reuters) – Wall Street brokerages held on Thursday on a positive outlook for Netflix Inc ( NFLX.O ) and insisted that a strong content slate for the remainder of 2019 would add to the shock losses US subscribers would cancel the share price in the second quarter.

FILE PHOTO: The Netflix logo can be seen in their office in Hollywood, Los Angeles, California on July 16, 2018. REUTERS / Lucy Nicholson / File Photo

The company's shares lost 11% in early trading Investors were worried about unexpectedly slow global growth and signs of problems on the US base.

Six brokerages lowered their price targets to reflect the decline in equities. However, stock valuations were not downgraded, leaving the majority of Wall Street companies still as a growth business with high potential and as a clear "buy".

The company had only 2.83 million paid streaming subscribers overseas, compared to 4.8 million expected customers. According to calculations by Brokers Cowen & Co, expectations for subscriber numbers in the second quarter have been missed three times in the last four years.

"The subscriber deficit was not unrivaled, even though the international shortfall was greater than normal," said analysts at RBC Capital Markets.

"The second quarter results, however, underline the importance of a strong content plan and raise at least the question of whether NFLX should be more restrained in raising prices."

Netflix, which has 151.6 million customers, increased prices in UK, Switzerland, Greece and Western Europe in the quarter.

Morningstar analysts said the company had led users to expect strong, original content on a quarterly basis, and if the plan is weak or less well known, it will be harder to get marginal subscribers to join or renew, especially if the prices increase.

The company launched the third quarter with the release of its 'Stranger Things' 1980s set and will feature the new seasons 'Orange is the New Black' and 'The Crown', as well as the anticipated Martin Scorsese movie 'The Irishman'.

"We would find that Netflix failures were followed by strong quarters, and in that sense, we expect Netflix 'very strong 2H slate to lead to a recovery in sub-growth," Credit Suisse analysts write in a customer message.

The company predicts that it will gain 7 million subscribers worldwide in the third quarter, as well as launch new seasons of the Spanish-language hit series "La Casa de Papel" and the second season of the Indian series "Sacred Games". [19659004] Netflix also unveiled a comprehensive expansion plan in India, including 5 new originals, a prequel series on India's epic fantasy franchise "Baahubali" and the introduction of a cheaper cell-phone-only plan within the next three months.

Reporting by Supantha Mukherjee in Bangalore; Edited by Patrick Graham

Our Standards: The Thomson Reuters Trust Principles.

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