Shares of Netflix dropped in early trading Wednesday, after the streaming giant reported a gain of just 2.2 million subscribers for the third quarter of 2020 — a major slowdown from its record COVID-driven gains in the first half of the year.
Netflix stock was down 5.7%, to about $495.34 per share, after the market opened.
Netflix execs downplayed the Q3 subscriber miss, and the company claimed that if the third quarter had been two days longer it would have come in ahead of its 2.5 million guidance.
CFO Spence Neumann, on Netflix’s earnings interview Tuesday, said the miss of 300,000 subscribers — on a member base of about 195 million — is “pretty much forecast noise.” He noted that year-to-date, Netflix has gained a little over 28 million paid streaming customers, already topping the 27.8 million added in all of 2019.
“Retention remains well at very healthy levels, better than we were a year ago, acquisition remains strong,” Neumann said. “[T]o measure our business, it’s really not based on any single quarter of growth fluctuation… [I]t should be measured in multi-quarter and multi-year trends.”
Analysts remained upbeat on the Netflix story, as the company topped revenue estimates for Q3 and remains well positioned to remain a leader in the subscription-streaming category.
“We remain bulls on the Netflix story as Netflix offers consumers an increasingly compelling unique entertainment experience on virtually any device, without commercials at a still relatively low cost,” Jeffrey Wlodarczak, Pivotal Research Group analyst, wrote in a research note after the Q3 earnings report.
Wlodarczak expects Netflix to make “further material price increases” to the service while also still growing subscriber totals. “In the end our view is that very few players can (or will) be able to keep up with Netflix content spend levels,” the analyst wrote. “Ultimately Netflix will (continue to) be the dominant global SVOD player with Disney+/Hulu a complementary second tier player, with Amazon on the periphery.”