Investors remain skeptical about company's ability to sustain profits
Netflix shares tanked in late trading on investor angst over quarterly results showing a 1.16 million boost in domestic users, on the low end of a range put out by founder and CEO Reed Hastings.The Los Gatos, Calif., company reported revenue of $905 million, up from $822 million in the year-earlier quarter, and net income of $8 million, down from $62 million. Wall Street studies Netflix quarterly subscriber spreadsheets like a Bible, and its wrath can be mighty, The shares, which have waged a mini-rally this fall, plunged 15% in after-hours trading to about $57. They are way off a 52-week high of over $130. Hastings had predicted 7 million net new U.S. subs this year but won’t likely meet that number now. But he said in a letter to shareholders that per member viewing grew by more than 30% year-on-year. “Our members continue to enjoy TV shows from Netflix in huge numbers. About two-thirds of our viewing is now episodic content and about one-third is movies. Both are important to us and our members,” he said. Investors fret over Netflix’s ability to sustain profits given the cost of overseas expansion and competition from Hulu, Amazon, TV Everywhere and others. A new streaming service from Redbox and Verizon is set to launch soon. Netflix debuted in Norway, Denmark and Sweden earlier this month. It needs swift subscriber growth to offset spending, but the third quarter was tough this year as the Summer Olympics on NBC stole eyeballs from all sized screens. Hastings had been looking for net U.S. adds in the range of 960,000 to 1.7 million.