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Netflix Falls Short on Users Without a 'House of Cards'-Size Hit

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Netflix is rallying ahead of earnings (NFLX)

Shares of Netflix (NFLX) were lower in on Tuesday, the day after the streaming company reported lighter-than-expected net subscriber additions for the 2017 first quarter and downbeat guidance for second quarter earnings.

The service combined almost 5 million subscribers in the initial three months of the year and will conclude March with 98.7 million customers in approximately 190 countries. The company said it added 1.5 million paid domestic subscribers and 3.8 million global subscribers during the quarter, missing Graham's estimates of 1.9 million and 4.2 million, respectively.

For the second quarter of 2017, Netflix expects to double the 1.68 million total subscriber additions added in the second quarter of a year ago. As part of its first-quarter earnings report Monday, Netflix responded to investor questions about Amazon's purchase of streaming rights for National Football League games next season.

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

The company's progress toward reaching that goal has helped drive Netflix's stock price progressively higher during the past five years, a stretch that has seen the video service add 72 million more subscribers.

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Q2 subscriber growth guidance (international): 2.6 million, versus Wall Street forecasts 2.1 million. Baird remains positive on the global growth opportunity, but views valuation as fair in light of increasing competition, rising content costs and steep free cash flow losses, which the company expects to continue.

Netflix can be considered one of the pioneers in streaming video, having made the jump to a subscription online movie and TV show business back when DVD rentals where still fashionable. Analysts anticipate that Netflix will post $1.11 EPS for the current fiscal year. Netflix had previously frozen prices for millions of subscribers at 2014 levels.

"Quarter to quarter you'll see some fluctuations, and some of that is due to the content slate", said David Wells, Netflix's chief financial officer.

Netflix net additions were slightly down on the comparable period last year partly because the launch of popular political drama House of Cards Season 5 has moved from Q1 to Q2 this year.

The firm's shares fell in after hours trading, dropping 3% with investors disappointed by the slower-than-expected growth.

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