Netflix’s Weak Subscriber Growth Contradicts Premium Valuation

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netflix hq, los gatos ca
The Netflix world headquarters building located in Los Gatos.

Investors are questioning Netflix’s(NASDAQ: NFLX)premium valuation after the company reported weak U.S. subscriber growth for the quarter. The lower-than-expected subscriber additions are a sign that competition from Hulu and similar services is growing.

Netflix shares dropped to $100.11, down 9%, in early morning trading.

The company blamed the mandated transition to chip-based credit and debit cards for the disappointing numbers. But analysts say that these cards have been around for a while, and it’s simply declining demand that led to weak subscriber growth.

Netflix had forecasted an addition of 1.15 million subscribers, but ended the quarter with 880,000 new subscribers.

Although the streaming service has won over audiences with original programming, like “House of Cards” and “Orange is the New Black,” Netflix is seeing increased competition from Hulu. Hulu may be a smaller service, but it managed to secure lucrative film franchises, like “Transformers” and “Hunger Games.”

Netflix is also seeing intensifyingcompetition from Amazon Inc. (NASDAQ: AMZN), which rebranded its streaming service to Prime Instant Video and launched the highly successful show “Transparent.”

Netflix’s international subscriber additions beat expectations, butanalysts say this was because of free trial subscribers.

Despite the disappointing numbers, investors are still confident in Netflix. The company’s stock has more than doubled this year.

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