Allstate Journal

Netflix shares fall after U.S. subscriber growth misses forecasts

Netflix shares fell sharply in after-hours trading after the streaming video provider’s third quarter subscriber growth and revenue fell short of Wall Street expectations. The Net TV company’s profit of 7 cents per share matched analysts’ estimate of 7 cents, compiled by FactSet. Third-quarter revenue of $1.74 billion fell short of the expected $1.75 billion, but surpassed that of the same period last year, $1.4 billion. Netflix reported net income of $29 million, compared to $59 million in the third quarter last year.netflix-building-fromap

Netflix (NFLX) shares were down as much as 13% in after-hours trading to $95.89 after closing Wednesday at $110.58, up 0.46%. Shares had risen about 14% over the last month. Netflix added more than 3.6 million new subscribers worldwide, surpassing its overall forecast. But it fell short of its target of adding 1.15 million U.S. streaming customers, instead adding 880,000. International subscriber growth surpassed the company’s forecasts with 2.74 million new customers. Three months ago, the firm forecasted third quarter additions of 2.4 million international customers, but many analysts had expected Netflix to surpass both forecasts.

Higher than expected customer churn in the U.S. caused the company to miss its domestic forecast, CEO Reed Hastings said in a letter to shareholders. The inability to collect payment from some customers “was driven in part by the ongoing transition to chip-based credit and debit cards,” he said. Still, the company is slightly ahead of 2014 domestic growth rates, Hastings said. “We expect to finish 2015 at about 2014 levels. This would mark the 4th consecutive year we’ve added about 6 million members in the U.S.” Overall, Netflix now has more than 69 million members and expects to surpass 74 million by the end of 2015, he said. The service just launched in Japan and next week begins operating in Spain, Italy and Portugal.

Hastings also addressed “the competitive landscape” that Netflix operates in, noting that Hulu added a $11.99 monthly subscription without advertisements, standalone service HBO Go’s expansion into Latin America and Amazon’s reported price tag of $250 million for Top Gear host Jeremy Clarkson’s new series. “The secular shift to on-demand consumption is best described as ‘consumers evolving vs. old habits’ rather than ‘Netflix vs. traditional media’,” he said. “We’re allracing to fulfill consumer desires.