COVID-19 Boom Fades... Netflix Growth Slows Down

Despite record-breaking Q2 sales and net profit

Off-market trading sees a 13% plunge per share

Signaling the burst of the untact stock bubble

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Despite Netflix, the video streaming company, posting record-breaking results in the second quarter of this year, its stock price plunged as much as 13% in off-market trading. As economic activities resume following the COVID-19 pandemic, there are concerns that this could negatively impact the performance of untact (contactless) industries.

According to Bloomberg and others on the 16th (local time), Netflix recorded all-time high sales and net profit in Q2. Netflix’s revenue for the period reached $6.14828 billion (approximately 7.4093 trillion KRW), a 25% increase compared to the same period last year, and net profit surged 160% to $720.19 million (approximately 867.9 billion KRW). The number of new subscribers in Q2 was 10.09 million, surpassing the forecast of 7.5 million. As of the end of last month, Netflix has secured 193 million paid subscribers worldwide.

Despite Netflix’s record-breaking performance, its stock price sharply dropped in off-market trading that day. The market closing price was $527.39 per share, but in the off-market it fell to $479.20, a drop of $48.19. This reflects pessimistic expectations that earnings will decline as the COVID-19 situation eases.

Netflix stated regarding this, "Growth in the first half of this year was maximized," and "due to the base effect and easing of COVID-19 lockdowns, growth rates in the second half are expected to decrease compared to the previous year." It also forecasted that the number of new subscribers in Q3 will significantly drop to 2.5 million. This is about half of the market forecast of 5.4 million and only a quarter of the new subscribers in the previous quarter.

Netflix emerged as a representative beneficiary of COVID-19 due to the surge in new subscribers caused by lockdowns and social distancing measures. Harris Anwar, an analyst at Investing.com, evaluated, "Netflix has clearly demonstrated that it is the representative 'stay-at-home stock'." Netflix’s stock price has risen 62.99% just this year. Bloomberg reported, "Although Netflix’s Q2 results were disappointing, it is still clear that it holds the lead in the streaming TV entertainment sector," maintaining expectations.

On this day, Netflix announced that Ted Sarandos, Chief Content Officer (COO), will be appointed as co-CEO alongside Reed Hastings, CEO. Sarandos, the co-CEO, has contributed to expanding Netflix’s content and is considered the second-in-command at Netflix.

This content was produced with the assistance of AI translation services.