Netflix Shares Dive After Profits Disappoint

Netflix shares dived on Thursday after the leading streaming entertainment service reported relatively flat quarterly profits despite rising subscriber numbers.

Netflix reported a profit of US$720 million on revenue of US$6.1 billion in the recently ended quarter, compared with US$709 million profit on US$5.8 billion in revenue during the first three months of the year.

Wall Street analysts had expected stronger profit, especially as people who are hunkered down at home due to the coronavirus pandemic turn to the service for entertainment.

Ranks of paid memberships grew by 10.1 million to about 193 million total, but Netflix warned growth could cool since sheltering-in-place likely meant people rushed to join in the early months of the pandemic as lockdowns began, instead of spreading out over the year.

Shares quickly dove more than 10 percent in after-market trades that followed release of the earnings figures but regained a bit of the loss.

Wedbush analyst Daniel Ives described the share stumble as a "near-term speed bump" due to overly exuberant expectations.

"Streaming growth is seeing a bonanza in this Covid environment," Ives said.

Pandemic-related restrictions have sped up a lifestyle shift from traditional television to streaming shows online, according to eMarketer forecasting analyst Eric Haggstrom.

"Looking forward, even as lockdowns are relaxed and new competitors begin to scale their services, Netflix will extend its lead as the first stop for entertainment," Haggstrom predicted.

Netflix said in a letter to shareholders that while its slate of original shows for this year is on track, it is focused on safely getting production back up and running.

"As the world slowly reopens, our main business priority is to restart our productions safely and in a manner consistent with local health and safety standards to ensure that our members can enjoy a diverse range of high quality new content," executives said in the letter. (AFP)