In the third quarter, Netflix Inc lost more customers than it expected and is waiting for more defections to come, which pushes its shares down 27 percent as the one-time Wall Street star struggles with the outcomes from a price upsurge and other unpopular moves.
The top video rental company accounted a better-than-expected 49 percent flow in third-quarter revenue to $822 million, which surpasses Wall Street’s target of about $812 million. It also beat beliefs on earnings per share.
However, investors – wary about the company led by CEO Reed Hastings causing some customers to be drive away in recent months and damaged its authority with a price rise and other high-profile stumbles – concentrated on the fourth-quarter warning.
Netflix shares dropped 27 percent to $86.70 in after-hours trading, around 70 percent less than high of just under $300 per share in July.
Janney Montgomery Scott analyst Tony Wible thinks the reason why the stocks continue to get crushed is because the trends just continue in deteriorating.
Netflix said it had lost over 800,000 U.S. subscribers in the third quarter, more than the about 600,000 it had foreseen in September. Total U.S. subscribers remained at 23.8 million.
Looking forward, the company said DVD subscriptions is going to weaken this quarter, but total U.S. subscribers, including customers who pay for its online streaming service, is going to be slightly up.
Netflix has been issuing big checks in an effort to expand its streaming content so that it could draw new subscribers and come back to the red-hot growth it got its fame before. In 2012, content spending is going to be almost double from this year, as stated by the company.
Hastings added that subscriber defections since of the price-rise expected to be sluggish in coming quarters “as the price effect washes through.” The company said it about to return its profitability by escalating its global streaming subscriber base quicker than costs rise. It also plans in raising its streaming margin by 1 percent every quarter.
The company accounted earnings per share of $1.16 on net income of $62 million. Analysts had predicted earnings per share of 94 cents.
According to Lazard Capital Markets analyst Barton Crockett, he got disappointed while looking at the subscribers’ numbers.
The same company, which shook up, Hollywood with its DVD-by-mail service tries to recover from the roughest patch in its virtually 15-year history as it moves to highlight online streaming of television and movies.