Less than a week after basking in post-Emmy-nomination glee, Netflix announced increased revenue and income, but its share price dipped.
Despite a growth in revenue and subscribers, streaming-video giant Netflix saw its stock price dip after reporting its financials for the second quarter.
For the quarter that ended June 31, Netflix revenue was $1.069 billion, up 20% from $889 million for the first quarter of 2012, but fell short of Wall Street's expectations of $1.072 billion. Quarterly net income rose to $29 million from $6 million.
Meanwhile, Netflix subscriptions grew to about 30 million U.S. streaming customers, up from 29.2 million, for a total of 36.3 million worldwide, the company reported. Analysts had hoped for a larger increase in U.S. streaming subscribers than the reported addition of 630,000.
Still, shares dropped 2.6% to close at $261.96 from Monday's morning high of $268, and that slide continued in after-hours trading to 7%.
Overall, subscriber growth was "utterly disappointing," says Wedbush Securities analyst Michael Pachter. "They added 630,000 domestic streaming subscribers, barely up year-over-year, and lost 470,000 domestic DVD customers."
But he saw a silver lining in that the company's cost for content was down slightly from 71% last quarter to 70.5%. "That isn't sustainable, in my view, but it drove the upside" of earnings per share rising to 0.49 cents from 0.11 in the second quarter of 2012, Pachter says.
At $13 million, compared with $11 million in 2012, "cash flow was positive, which was a real surprise, but that is more attributable to the timing of spending on their deals, and is still negative for year-to-date," Pachter says. "Change in 'other current assets' and change in accrued expenses accounted for $31 million of the cash flow difference, am not sure these are sustainable."
The company had seen its stock rise to nearly $270 a share last week with the announcement that the streaming service had gotten 14 Emmy nominations. Among them: nine for House of Cards, including nominations for best drama, as well as top acting nods for stars Kevin Spacey and Robin Wright. Arrested Development star Jason Bateman was nominated for best comedy actor for that series, which Netflix brought back to life in May after it was canceled by Fox in 2006. Horror seriesHemlock Grove also got two nominations.
While it lost nearly 500,000 subscribers, Netflix's DVD rental-by-mail service still has more than 7.5 million.
"The world is moving from linear TV to Internet TV, and Netflix is leading that evolution," wrote CEO Reed Hastings and CFO David Wells in a letter to shareholders.
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