Netflix stock plummets despite bright forecast


SAN FRANCISCO–Netflix’s comeback from a customer backlash accelerated during the first quarter, but the recovery wasn’t impressive enough to ease more pressing concerns about the Internet video subscription service’s ability to cope with tougher competition.

Wall Street’s worries about the challenges facing Netflix Inc. crystallized Monday with the release of the company’s first-quarter results and forecast for the upcoming months.

The company, which is based in Los Gatos, California, posted its first quarterly loss in seven years during the three months ending in March. The setback, though, was far smaller than analysts anticipated.

Instead of celebrating several positives contained in the report, skittish investors keyed on a second-quarter forecast that calls for a slowdown in subscriber growth during the spring and early summer. The April-to-June period has historically been a sluggish period for Netflix because more daylight and warmer weather tends to discourage people from staying inside to watch movies and old TV shows. That’s the main reason Netflix cited for its prediction that its service for Internet video streaming might add as few as 200,000 U.S. subscribers in the second quarter after gaining 1.7 million customers in the first three months of the year.

Netflix shares plunged US$16.94, or nearly 17 percent, to US$84.90 in Monday’s extended trading.

In a conference call, Netflix CEO Reed Hastings urged investors to focus on the bigger picture. He predicted the company will add about 7 million streaming subscribers in the U.S. for all of 2012. That would be about the same number that Netflix attracted in 2010 — the company’s biggest growth year so far.

The first-quarter progress wasn’t enough to avert Netflix’s first loss for any three-month period since the first quarter of 2005. The red ink flowed mainly because of the company’s costs for international expansion and rising fees to license content for its Internet video library.

Netflix lost US$4.6 million, or 8 cents per share, during the quarter. That compared to net income of US$60 million, or US$1.11 per share, at the same time last year.

First-quarter revenue climbed 21 percent from last year to US$870 million.