Netflix (NFLX) shares took a dive after the company released its second quarter earnings report. The streaming service reported that it added just 2.7 million paid subscribers worldwide during the period, missing analysts’ expectations calling for 4.8 million subscribers.
The stock fell 10.2% on Thursday.
The results may have worried investors dealing with the loss, but some analysts say it’s really no cause for major concern.
“Netflix has a history of beating big and missing big,” said BTIG Managing Director Richard Greenfield. “I think this is a typical overreaction that is followed by strong growth in the stock that you’ve seen when they’ve missed like this before.”
Some of the subscriber fall-off could be due to Netflix’s price increase from $10.99 to $12.99. But as Greenfield pointed out, over 99% of subscribers in the U.S. are not bothered by the prices enough to cancel out on the company.
He says it is possible that the numbers could have been higher had the release of Stranger Things season 3 timed better with the second quarter earnings report.
“If Stranger Things had come out the last week of the quarter, would they have beaten numbers? It’s very possible,” Greenfield said.
In its Q2 letter to shareholders, Netflix management addressed the Q3 release of the hit show saying “the first two weeks of Q3 are strong”
“To view the one quarter of negative when the whole year is gonna add four to five million subscribers at twenty percent higher pricing, show me another service,” he told Yahoo Finance’s On The Move.
Streaming Competition Queues Up
Greenfield says that investors should really be paying attention to Netflix's global expansion on the streaming market in Asia, due largely in part to its move producing original content programs relevant to a region’s entertainment interest.
“The first six months of the year has been a pretty incredible story for Netflix on a global basis,” Greenfield said, going on to note the company’s international subscriber growth. “Their competitors are all now saying ‘We need to be in this business. We need to get started and get going.’ And they’re all rushing to get into the streaming business.”
Media giants Disney and Apple are set to introduce streaming services later this year. HBO Max, a newly announced service, is set to launch in Spring 2020.
“The reality is the long-term trend is linear television is shifting to internet television. Netflix has been crushing that. They’re the leader in this category. They’ve defined the category. Everyone is trying to play catch-up now.”
Marabia Smith is a producer for Yahoo Finance On the Move.