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(No-Data-Available, APR 23)
(No-Data-Available, APR 23)

Netflix shares plunge on slower subscriber growth Add to ...

Netflix Inc. warned on Tuesday it may have trouble reaching its year-end target for new subscribers and will record a loss in the last three months of the year, sending the shares of the video rental company down 14 per cent.

For the second-quarter, Netflix reported earnings of 11 cents a share, beating analysts expectations of 5 cents, and said it added 530,0000 new customers to its video streaming service in the U.S. market.

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But in a quarterly letter to shareholders, the company said the Olympic games will likely hurt its ability to sign-up new customers in the current quarter, when it expects to add 1 million to 1.8 million subscribers.

Netflix said it would stay on track to reach 7 million net additions for all of 2012 if the company hits the high end of third-quarter estimate.

“Otherwise, it would be challenging to achieve that goal by year end,” said the letter from CEO Reed Hastings and CFO David Wells.

The company also said it would be in the red in the fourth quarter when it launches its streaming service in another international market. Netflix had a loss in the first three months of the year as it expanded into Britain, but returned to a profit in the second quarter.

“Guidance on the (subscribers) was cautious,” Morningstar analyst Michael Corty said in explaining the share drop.

Netflix shares were down 14 per cent at $69.15 in after-hours trading from their $80.39 close on Nasdaq.

The company said its second-quarter revenue rose to $889-million in the April to June period. Profit was $6-million.

Netflix needs to keep growing fast to pay commitments to Walt Disney Co., Warner Bros, CBS Corp and others to stream their movies and TV shows. At the same time, it faces emerging competition from websites such as Amazon.com Inc and Hulu.

A year ago, Netflix posted earnings of $1.26 a share for the quarter, which ended just before its controversial decisions to raise prices and charge separately for its streaming and mail service prompted a wave of cancellations.

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