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Netflix stock falls after subscriptions fall short of expectations

Netflix stock falls after subscriptions fall short of expectations

Netflix stock fell more than 6 percent in early trading Wednesday after the streaming service reportedly fell short of expectations for subscriber growth. 

Netflix added 2.2 million new subscribers in the third quarter of 2020, which is far less than the same time last year, when the company added 6.8 million new subscribers. 

The company said in a Tuesday letter to shareholders that it expected the slowed growth and attributed it to “record first half results.” 

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Spencer Wang, Netflix vice president of investor relations, told investors to not put too much emphasis on subscriber numbers, according to CNBC

“We just really don’t over-focus on any 90-day period,” Wang said in a recorded earnings interview. “And just to give you an example, if the quarter was 48 hours longer, we would have come in slightly above our guidance forecast.”

Netflix executives said in June that they anticipated the decline after landing 26 million new subscribers in the first half of 2020. That surge likely pulled from new subscriptions that would have started in the second half of 2020, since people who would have subscribed later did it sooner due to the pandemic. 

“Growth is slowing as consumers get through the initial shock of Covid and social restrictions,” they wrote at the time. “Our strong first half performance likely pulled forward some demand from the second half of the year.”

Netflix anticipates adding 6 million new subscribers in the fourth quarter of 2020, it said in the letter, far below the 8.8 million it added during the same time in 2019. It also hopes to return to pre-COVID growth levels next year. 

“We believe our record first half paid net additions would result in slower growth in the back half of this year,” the company said in the letter. “If we achieve our forecast, it will put us at a record 34m paid net adds for 2020, well above our prior annual high of 28.6m in 2018.” 

In the first nine months of 2020, the company added 28.1 million new members, exceeding the 27.8 million that it added for all of 2019.