How The Movies Killed Netflix
July 22, 2010 8:27 AM
Wall St did not like the results of Netflix (Nasdaq: NFLX) last quarter and flogged the movie rental company’s shares as if they were Blockbuster’s, taking 10% off its market cap.
Investors have come to expect that Netflix will add very large numbers of new subscribers each quarter. That did not happen in the second quarter. Subscriptions rose only 7% from the end of the first quarter to 15,001,000. Revenue growth was also lackluster, up 5% from the first quarter to $519.8 million. Net income was up modestly from to $44 million in Q2 from $33 million in Q1. Netflix has demonstrated that it is more disciplined at containing costs than most growth companies.
Netflix’s problem is that it is not a growth company anymore. It anticipates that third quarter revenue may be as low as $546 million and total subscriptions may be only 16.3 million.
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