Netflix Stock: Shares of the streaming video well-renowned giant are trading rapidly lower after Thursday hours amid signs that the growth spurt driven by the company’s Covid-19 is coming to a close.

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Netflix gained 10.1 million net new subscribers in the June quarter announced Thursday, above the company’s 7.5 million projection, but still short of Wall Street expectations that had exceeded 12 million or more. Netflix forecasts net contributes in the September quarter of just 2.5 million, well shy of analyst perceptions.

Netflix (ticker: NFLX) got to add 15.77 million net new subscribers in the March quarter, topping seven million in guidance.

Netflix reported revenue of $6.15 billion for the second quarter, up 24.9 per cent from a year earlier and well ahead of the $6.08 billion forecast of Wall Street analysts. Profits were $1.59 a share, dropping short of a $1.81 a share estimate, largely owing to a pair of non-operating products.

“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 versus prior year of 12 million),” the company said in a letter to shareholders. “As a result, we expect less growth for the second half of 2020 compared to the prior year. As we navigate these turbulent circumstances, we’re focused on our members by continuing to improve the quality of our service and bringing new films and shows to people’s screens.”

Netflix created net cash of $1.04 billion in the quarter, with free cash flow of $899 million, partially due to reduced content creation activity due to the Covid-19 pandemic.

Adjusted Ebitda was $1.49 billion (earnings before interest, taxes, depreciation, and amortization). (The company worked consistently in red for net income, free cash flow and adjusted Ebitda before the pandemic.) With the exception of foreign exchange, average revenue per consumer was 5 per cent higher.

The company stated the lower-than – expected per-share earnings represent an unfulfilled loss of $119 million due to foreign exchange calculation of euro denominated debt and a non-cash valuation allowance of $220 million for deferred tax assets due to a shift in California’s R&D tax credit legislation.

Netflix is expecting sales of $6.3 billion for the September quarter, up 20.6 per cent from a year earlier, with earnings of $2.09 a share; this is around $6.39 billion and $2 a share in line with the Street.

In the meantime, Netflix has revealed that, alongside Reed Hastings, Ted Sarandos, who remains chief content officer, will become co-chair man. The company also named Greg Peters to the extra post of chief operating officer, who remains the chief product officer.

Netflix Stock: On a call with investors, Reed Hastings stated the management changes revealed today do not mean he is pulling back from his leadership position. Hastings said he plans to remain in his present position for the remainder of the decade.

Netflix has said that development is gradually restarting in many parts of the world. In Asia it is the furthest along. The company said that it is back in service in several places in Europe, such as Germany, France, Spain, Poland, Italy, and the UK.

Netflix Stock: U.S. progress has been relatively slow. “While we recently resumed production on two films in California and two stop-motion animation projects in Oregon and expect some more of our U.S. productions to get going this quarter, current infection trends create more uncertainty for our productions in the U.S.,” Netflix said. The company stated that “parts of the world like India and some of Latin America are also more challenging,” with plans to reboot in those regions later in the year.

Netflix stated that plans to produce original shows and movies by 2020 remain largely intact. “For 2021, based on our current plan, we expect the paused productions will lead to a more second half weighted content slate in terms of our big titles, although we anticipate the total number of originals for the full year will still be higher than 2020,”the company said.

Netflix said that it projects full-year cash flow to break even in 2020, compared to a previous outlook for a loss of around $1bn. The company again perceives negative cash flow for 2021 but below the reported level of $3.3 billion in 2019.

Netflix Stock: The business also said that despite its existing cash balance, a $750 million undrawn credit facility, and increasing free cash flow, it does not intend to access debt markets for the remainder of 2020 “and we believe our need for external financing is diminishing.”

Netflix shares are down 9.4 percent to $478.00 in after hours of trading.

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