(Reuters) - Netflix Inc’s subscriber growth fell short of Wall Street expectations on Monday, sending shares of the normally high-flying stock down 14 percent on fears that the company’s rapid expansion is slowing.
The streaming video pioneer added 5.2 million customers from April through June, 1 million fewer than forecasts from Thomson Reuters I/B/E/S, as it added new programming including “Lost in Space” and new episodes of Marvel’s “Jessica Jones” and “13 Reasons Why.”
“We had a strong but not stellar Q2,” Netflix said in a quarterly letter to shareholders.
Netflix said it had “over-forecasted” quarterly fluctuations in the pace of new customers. The company noted that it had underestimated subscribers for seven of the past 10 quarters.
Before the earnings report, Netflix shares had gained 109 percent, making it the second-strongest performer on the S&P 500 index. In after-hours trading on Monday, Netflix shares sunk 14 percent to $343.60, eroding $24.2 billion in market capitalization and down from an earlier close of $400.48.
“Investors are devastated by Netflix’s Q2 projection that went down in dramatic flames. Now future projections are suspect and that decimates valuation,” said Eric Schiffer, chief executive officer of private equity firm Patriarch.
Wall Street had been betting that Netflix would deliver outsized growth as demand for online entertainment increases around the globe. The company is spending heavily to hook new customers, budgeting $8 billion for programming and $2 billion for marketing in 2018.
Netflix added 670,000 subscribers in the United States, well below analysts’ estimates of 1.19 million, according to Thomson Reuters I/B/E/S.
It signed up 4.47 million subscribers internationally, while analysts were expecting 4.97 million.
The overly optimistic projections were “pretty broad across multiple markets,” Chief Financial Officer David Wells said on a post-earnings webcast.
