What happened

Shares of Netflix (NASDAQ:NFLX) fell as much as 11.6% on Thursday morning. The streaming video giant reported second-quarter results after Tuesday's market close, and they fell far short of a few key guidance targets.

So what

Netflix delivered second-quarter earnings of $0.60 per diluted share on $4.9 billion in top-line revenue. These metrics compared favorably with guidance targets of $0.55 per share and $4.9 billion, respectively. However, Netflix achieved these results while reaching just 2.7 million net new paying subscribers -- a far cry from the expected 5 million subscriber additions. In particular, some investors found it alarming that the number of total paid subscribers actually fell in the domestic market for the first time in that metric's reported history.

A young woman watching a scary movie on her couch, gripping a large pillow tight.

Image source: Getty Images.

Now what

Management said that subscriber growth came in below expectations across all geographies, though the shortfall was a little bit sharper in markets where price increases took effect in recent months. It also said that increased competition in the streaming video market did not look like a limiting factor, as the softness wasn't related to the presence or absence of new rival services in a market-by-market analysis.

The official explanation is that the second-quarter slate of original content failed to inspire strong growth, but it is also possible that seasonal effects are turning out to be more pronounced than Netflix's management had thought. The second quarter has always been the slowest growth period of each year, and subscriber additions have now come in below guidance in three of the last four Q2 reports. The company came back swinging with strong growth in the next few quarters of 2016 and 2018, and I wouldn't be surprised to see that pattern being repeated in 2019 as well:

Third-quarter hits such as new seasons of Stranger Things and Orange Is the New Black should support that effort. Moreover, the second-quarter earnings surprise was sparked by marketing budgets being shifted into the third quarter. Another subscriber miss in the next report would be a genuine shock, given these growth-boosting details.

Netflix investors have pocketed a 226% return over the three-year period mentioned above, despite double-digital drops in the share price following each one of the second-quarter subscriber disappointments. Today's 11% discount looks like a solid buy-in opportunity.