Netflix Is Having Trouble Attracting More Subscribers

Streaming video pioneer Netflix ended the first quarter with fewer customers than Wall Street expected but issued a bullish forecast on the number of new subscribers it expects by mid-year, in a positive sign for its big international expansion.

The company pushed back the next season of its defining hit, House of Cards, and other programming to the second quarter, which should boost the number of new subscribers in that period, Netflix said.

It added just under 5 million subscribers globally in the first quarter and expects 3.2 million more in the seasonally slow second quarter. Analysts had forecast nearly 2.4 million for the second quarter, according to FactSet.

Netflix shares (NFLX), which typically swing wildly after earnings reports, dropped as much as 3% in after-hours trading before rebounding to gain 1.3%.

The company, which shook up Hollywood with its monthly, on-demand streaming service, said it expects to top 100 million global customers this weekend, and the after-hours share move put it on track to open at a record high.

Netflix has expanded around the world over the last few years, betting that its U.S. formula would pay off in other countries. Opening in new markets and creating shows in additional languages was an expensive proposition.

Netflix earnings per share in the first quarter beat Wall Street targets due to the change in timing of House of Cards, which pushed costs into the second quarter, boosting operating margins from January through March and reducing them in the second quarter.

“We have come to see these quarterly variances as mostly noise in the long-term growth trend and adoption of internet TV,” the company said in its quarterly letter to shareholders.

For the quarter that ended March 31, Netflix added 3.53 million subscribers outside the United States.

Analysts on average had estimated 3.68 million additions, according to research firm FactSet StreetAccount.

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In the United States, the company added 1.42 million subscribers, compared with analysts’ average estimate of 1.50 million.

The Los Gatos, California-based company said revenue rose 34.7% to $2.64 billion in the quarter.

Net income rose to $178 million, or 40 cents per share, from $28 million, or 6 cents per share.

Netflix said it expects to add 600,000 subscribers in the United States in the current quarter, above the FactSet estimate of 364,000.

In international markets, Netflix expects to add 2.60 million subscribers, above the average estimate of 2.09 million.

Up to Monday’s close, Netflix‘s stock had risen nearly 19% in 2017, outperforming the roughly 5% gain in the broader S&P 500 index.

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