Tags: Earns | Netflix

Netflix Subscriber Outlook Sends Shares Down

Monday, 23 Apr 2012 04:28 PM

 

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Netflix Inc., the world’s largest video-subscription service, said customer growth will slow after posting first-quarter gains that met analysts’ estimates. The stock fell as much as 16 percent in extended trading.

Netflix, based in Los Gatos, California, added 1.74 million new U.S. online subscribers to reach 23.4 million, the company said Monday on its website. That matched the average of nine analysts’ estimates compiled by Bloomberg. Second-quarter growth will slow by at least half and probably more.

Chief Executive Officer Reed Hastings cited seasonal factors for the slowdown. The company is racing to add customers to confront competition from Comcast Corp.’s StreamPix and Verizon Communication Inc.’s online venture with Coinstar Inc.’s Redbox. While Netflix may post a second-quarter profit, investors are focused on customers additions.

“They guided to subscriber growth dropping a ton quarter- over-quarter, and some people think as soon as growth stops, this thing’s over,” said Michael Pachter, a Wedbush Securities Inc. analyst in Los Angeles who has an underperform or sell rating on the stock. “They are saying, ‘We’re not going to grow very much and instead we’re going to focus on making money.’”

For the second quarter, domestic online users will increase to between 23.6 million and 24.2 million, suggesting growth of 200,000 to 800,000. Analysts were predicting a gain of 781,000 online users. DVD will users shrink by 740,000 to 1.14 million customers, to as little as 8.95 million, the company said. Analysts had forecast a drop of 623,000.

Second-Quarter Net

The company said this quarter could range from a loss of as much as $6 million, or 10 cents a share, to a profit of $8 million, or 14 cents, on sales of $873 million to $895 million.</p><p> Netflix fell as much as 16 percent to $85.99 in extended trading. The stock lost 4 percent to $101.84 at the close in New York and has gained 47 percent this year.

Netflix posted a first-quarter net loss of $4.58 million, or 8 cents a share, the result of costs for its Latin American and U.K. expansion. That was smaller than the $9 million to $27 million loss the company predicted in January. Sales rose 21 percent to $869.8 million, beating the $865.5 million average of 27 analysts’ estimates.

Analysts and investors say Netflix’s domestic streaming business may stall this year, at a time when the company needs additional revenue to stay ahead of new competitors and counter unprofitable growth overseas, including continued losses in Latin America.

Netflix has commitments to spend $3.9 billion over the next five years on films and TV shows, according to filings.

© Copyright 2014 Bloomberg News. All rights reserved.

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