Netflix Stock Plunges

Image representing Netflix as depicted in Crun...

Image via CrunchBase

Netflix Inc.’s recently announced and much-reviled price increase will bring weaker third-quarter financial results than Wall Street had expected, contributing to a 10% drop in the company’s stock in after-hours trading Monday. Revenue in the three months ended June 30 was $789 million, just slightly below the consensus estimate from analysts of $791.5 million.

However, the company’s predicted results for the current quarter were a significant disappointment. Netflix said it would generate between $799.5 million and $828.5 million in revenue, lower than the $846.5 million consensus. Earnings per share are expected to be between 72 cents and $1.07; Wall Street had forecasted $1.09. In a letter to investors, Netflix Chief Executive Reed Hastings and Chief Financial Officer David Wells said slow growth in the current quarter would be driven by the price increase that sparked outrage among some users.

In a tacit acknowledgement of the anger the price increase sparked, including more than 80,000 comments on the company’s Facebook page, the letter said, “We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we’re working hard to further improve the quality and range of our streaming content in Q4 and beyond.” The company predicted it would end the current quarter with between 24.6 million and 25.4 million subscribers in the U.S., which could mean no increase from its June 30 total of 24.6 million. Netflix expects that about 10 million people will choose the streaming-only plan, 3 million the DVD-only plan, and 12 million will pay higher prices for both. Who knows what the future will hold for the company but as of now I am a subscribed Netflix user, However as many others are doing after the increase in price I will have to cancel my subscription… Sorry Netflix.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s