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Netflix Shares Plunge as Subscriber Losses Grow

Monday, 24 Oct 2011 05:09 PM

Netflix Inc., the video-rental service, posted third-quarter user losses that were worse than its September forecast and predicted more cancellations over a price hike. The shares plunged 21 percent in extended trading Monday.

Domestic users fell to 23.8 million as of Sept. 30 from 24.6 million three months earlier, a bigger decline than the company projected. This quarter, total domestic subscribers are forecast to increase slightly, Los Gatos, California-based Netflix said in a website statement.

The outlook suggests Netflix will fall short of the 24.9 million customers analysts project this quarter, the average of 10 estimates in a Bloomberg survey. The number underscores the fallout from a September price increase and aborted plan to force subscribers into separate streaming and DVD services.

Netflix fell 21 percent to $93.93 in extended trading. It rose 1.5 percent to $118.84 at the close in New York. The shares have fallen 32 percent this year.

Investors are trying to gauge the extent of the fallout of the price increase and aborted plan to put DVD customers on a new service called Qwikster.

Streaming subscriptions are forecast to decline this month, level off in November and rebound in December, Netflix said. DVD subscriptions will fall “sharply.”

Fourth-quarter profit will be $19 million to $37 million, or 36 cents to 70 cents a share, on revenue of as much as $875 million, the company said. Analysts were projecting profit of $1.10 a share on sales of $919 million, according to Bloomberg data. The company earned $47.1 million, or 87 cents a share, on sales of $595.9 million, a year earlier.

Domestic Totals

Domestic subscriber growth is particularly important because Netflix is using its wide lead over U.S. rivals to finance growth in its streaming business and expand overseas.

Netflix had projected a loss of 600,000 users on Sept. 15 to end the third quarter at 24 million. The results were in line with the loss of 780,000 customers projected by 10 analysts in a Bloomberg survey.

For the third quarter, Netflix reported net income rose to $62 million, or $1.16 a share. Analysts projected profit of 95 cents, the average of 25 estimates. Sales rose 49 percent to $822 million, beating expectations of $812.8 million.

Earlier today, Netflix announced it will begin selling subscriptions in the U.K. and Ireland in 2012, putting it in competition with Amazon.com Inc.’s LoveFilm.

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Netflix Inc., the video-rental service, posted third-quarter user losses that were worse than its September forecast and predicted more cancellations over a price hike. The shares plunged 21 percent in extended trading Monday. Domestic users fell to 23.8 million as of...
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2011-09-24
Monday, 24 Oct 2011 05:09 PM
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