Netflix announced their 3rd Qtr earnings today after the markets had closed, but it didn’t save the stock from a pummeling at the hands of a terrible report. After close, Netflix stock has taken an absolute beating, losing over $30 (27%) to around $87 which is the lowest the stock has been since May 2010. It is also down over 66% from its historical high of $298 seen three short months ago in July before they started shooting themselves in the foot.
As for why the earnings caused the stock price to take a beat down, it is due to subscribers lost for the 3rd Qtr topping out at 800K, which was 200K more than Netflix forecast (600K loss) last month. In addition, Netflix warned that DVD rentals by mail will likely decline sharply after they completely
botched the attempt to spilt the service out to a separate website called “Qwikster.” The last bit of negative news is that Netflix expects to be in the red (losing money) for the next several quarters, and possibly all of 2012 due in part to a European expansion plan.
While many will take this news as ho-hum and Gamers may wonder why they should care, the big issue is that Netflix suddenly has lost much of its capital and value (and expecting more subscriber losses) and may be hard-pressed to come up with the necessary funds to cover the increasing license fees for the streaming services
they keep hoping will bail them out.
For anyone that has a Netflix subscription, one key indicator will be the addition of new and timely content to the site. While we have gotten a bunch of 10-20 year-old films and TV shows lately, what we haven’t gotten is more timely streaming of TV content and newer movies. If we don’t see this by the end of the year and Netflix has another failed Qtr, it may be time to start shopping around for an alternative before the junk really hits the fan.
You can watch the carnage
here if you wish....
