Now Isn’t the Time to Binge on Netflix

Netflix (NFLX) shares fell 15% in after-hours trading to $83.90, after closing up 0.4% Monday at $98.81.

“We are growing, but not as fast as we would like or have been”, said the letter to shareholders.

Netflix CEO Reed Hastings included this Google Trends graph in the company’s earning report to show an uptick in the search term “netflix price increase” earlier this year.

Mahaney continues, “We also view Netflix as one of the best derivatives off the strong growth in online video viewing and in Internet- connected devices (tablets, smartphones, Internet TVs), … tracking significantly improved customer satisfaction levels”. As per analysts’ estimates, the second-quarter earnings is expected to be 2 cents a share, down from 6 cents from previous year.

Netflix only added 160,000 USA subscribers from April through June, its lowest gain in the period since splitting up its video-streaming and DVD-by-mail services five years ago.

Its global operations lost $69 million in the second quarter, or an average of about $2 per overseas subscriber. And the streamer added 1.5 million subscribers overseas, well down from a 2 million forecast. The company said that competition from the likes of Hulu and Amazon did not contribute to the miss. As for the reason behind low growth, it might not have had to do with a lack of fresh Netflix addicts but with long-time customers becoming dissatisfied with price hikes. “Whatever the price is for something, people don’t like for it to go up”.

“Churn of members who were actually ungrandfathered is modest and conforms to our expectations”.

The company expects that Olympics coverage and further un-grandfathering will affect its ability to attract new users. In the third quarter, Netflix expects to attract 300,000 US users.

A survey conducted by Jefferies showed that existing users as well as potential users take into consideration both prices and content. Atlantic Securities upgraded Netflix from a “neutral” rating to an “overweight” rating and boosted their price objective for the stock from $115.00 to $130.00 in a report on Friday, April 1st.

The caveat here is that Netflix does periodically surprise itself, and the Street, with its subscriber numbers. Dubbed “un-grandfathering”, the process was made even more confusing by Netflix’s decision to spread it out over the remainder of the current year.