Netflix stock dips despite beating third-quarter expectations
Streaming firm's fourth-quarter forecast underwhelms
Netflix stock dipped by as much as 3.4% on Wednesday, despite beating third-quarter expectations.
The streaming giant said it added 4.38 million new subscribers in the three months to the end of September, 880,000 more than the company’s own forecast and 600,000 more than predicted by analysts.
The California-based company’s total number of subscribers stood at 213.5 million.
Netflix’s profits amounted to $1.45bn, or $3.19 per share, comfortably beating the $2.57 per share forecast by Wall Street and $1.45 more than the third quarter of 2020.
Revenue rose by 16% – just over $1bn – from the same period last year, meeting analysts‘ expectations of $7.48bn, while operating income rose 33% vs. the prior-year quarter to $1.8bn.
The company now hopes to add 8.5 million new subscribers in the final quarter of 2021, in large part because of the success of the series Squid Game.
The Korean-language show is the standout success of 2021, claiming the number one spot on the platform in 94 countries. Netflix said roughly 142 million households have thus far watched the series worldwide.
Rising production costs
Despite this success and its imminent move into the gaming sector, Netflix stock fell because the company’s forecasted fourth-quarter earnings of 80 cents per share on sales of $7.71bn came in well below the $1.13 per share on sales of $7.66bn predicted by analysts.
Co-CEO Reed Hastings described the firm as being in “uncharted territory” with an abundance of programming, but production costs have taken their toll.
In a letter to shareholders, the firm stated: “After a lighter-than-normal content slate in Q1 and Q2 due to Covid-related production delays in 2020, we are seeing the positive effects of a stronger slate in the second half of the year.
”We're very excited to finish the year with what we expect to be our strongest Q4 content offering yet.”
By 11:30 (EST), Netflix traded down 1.2% at $631.05, 20.6% higher than its 2021 starting level.