By Yasin Ebrahim
Investing.com - Shares of Netflix (NASDAQ:NFLX) plunged on Thursday as the streaming giant's second-quarter earnings fell short of estimates and it forecast lower-than-expected subscriber growth for the third quarter.
The company said that chief content officer Ted Sarandos would also become co-CEO.
Netflix was down more than 10% after the report.
Looking into the third quarter, Netflix said it expected to generate 2.5 million new subscribers, while Wall Street estimated 5.3 million, stoking worries about waning demand as competition heats up.
"In Q1 and Q2, we saw significant pull-forward of our underlying adoption leading to huge growth in the first half of this year (26 million paid net adds vs. prior year of 12 million). As a result, we expect less growth for the second half of 2020 compared to the prior year," Netflix said in a statement.
Netflix announced earnings per share of $1.59 on revenue of $6.15 billion. Analysts polled by Investing.com anticipated EPS of $1.82 on revenue of $6.09 billion.
The earnings beat was driven by a rise in the subscriber growth during the second quarter, as lockdown measures worldwide bolstered demand for streaming.
Subscriber numbers grew by 10.1 million during the three months that ended June 30, markedly above Wall Street estimates of net new subscribers of 8.26 million.
Looking ahead to the full year 2020, Netflix said it was still targeting a 16% operating margin.
"The problem is in the details. The company is now seeing a significant deceleration in this growth as it expects the initial boost from the pandemic to evaporate soon and things go back to normal.This projection is certainly negative for the stock which has to give up some gains and reflect this new reality," Investing.com analyst Haris Anwar said.
Netflix shares are up 62% from the beginning of the year, still down 8.31% from its 52-week high of $575.17 on July 13. They are outperforming the S&P 500 which is down 0.47% from the start of the year.
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