The results of this quarter are significant for Netflix as it introduced its services in as many as 13o countries outside the USA in January this year. 42 per cent of the overall total.
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The weak outlook sent Netflix shares down 10% to $97.20 in after-hours trading-despite the company reporting a surprising increase in earnings for the first quarter.
Investors have been more than willing to wait out Netflix’s losses while it spends lavishly to expand its service to most corners of the globe. Netflix is phasing out the older prices and moving all customers to the $9.99 level, but seems aware of the risks of a sudden price jump for so many of its users.
“The current leg of the Netflix growth story is based upon global growth”, Paul Sweeney, a Bloomberg Intelligence analyst, said in an e-mail. Netflix is expected to add 1.75 million USA subscribers in the first quarter of 2016, which would be the smallest increase since 2012. Worldwide net adds are down sequentially both due to standard seasonality and our launch in 130 countries at very beginning of Q1 (so Q1 captured the initial surge of signups). It will also be possible now to subscribe to the Prime streaming service on its own, without the delivery option.
Amazon has a record 81.5 million subscribers, gaining 33 million of that since they started producing original content, according to ABC News.
The company’s high-flying stock, up by a third in the past year, fell 7 percent to $100.46 in premarket trading on Tuesday. Wall Street thinks it’s the latter judging by the 12% slump in the Netflix stock in the minutes after the company revealed sluggish first-quarter figures this morning.
“Ex-ANZ, global net adds would be forecast up this quarter”, the company said in a letter to shareholders. Netflix has favored organic growth throughout its two-decade history.
Investors have permitted CEO Reed Hastings to run the company at close to break-even because of his promise of significant profits starting next year. “We are rolling this out slowly over the year, rather than mostly in May, so we can learn as we go”.
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According to its release, the company’s quarterly revenues amounted to $1.96bn for the quarter, a jump from a year earlier when it generated $1.57bn. It added 2.23 million in the quarter, down slightly from additions of 2.28 million in the year-ago period. Netflix reported an EPS of $0.06 on a profit of $27.66 million or $0.07 with certain items excluded.
