Netflix reported quarterly earnings Tuesday that beat analyst expectations, but shares fell 13% after-hours as the company offered a weak outlook for the rest of the year.
Netflix reported $889 million in revenue, in line with analyst expectations, and earnings of 11 cents a share, ahead of analyst projections for five cents.
In the third quarter, Netflix said it expects to post results anywhere between a loss of 10 cents a share and earnings of 14 cents a share. For the fourth quarter, the company said it will return to the red as it expands in Europe.
Netflix had warned previously that it would lose money throughout 2012 as it expands internationally.
Netflix also said it may be “challenging” for it to meet its goal of adding 7 million new streaming subscribers in the United States this year if those numbers don’t come in strong in the third quarter. in the first half of the year, Netflix added roughly 2.3 million new domestic streaming subscribers. In a letter to investors outlining the results, Netflix CEO Reed Hastings suggested that the Olympics could have a negative impact on viewing and sign-ups.
Netflix’s stock has been volatile this year, pushing close to $130 in February before dipping to around $62 in June. Shares jumped more than 10% earlier this month after Hastings revealed that subscribers watched more than 1 billion hours of video in June.
A key concern for Netflix is how much it will have to shell out to retain its catalog of TV and film titles.
Studios are demanding that Netflix pay them more money for their content, and not all of those negotiations are working out. Netflix was unable to renew its contract with Starz, a key content supplier. The Liberty Media-owned cable company has a large chunk of Disney movies that are now no longer in Netflix’s catalog.
Terrible 2011: Netflix was once the company that could do no wrong in the eyes of customers and investors.
But 2011 was a year full of missteps that eroded both Netflix’s reputation and market value. The troubles began in September, when Netflix hiked prices by 60% for customers subscribing to both Netflix’s DVD and streaming business. In the third quarter of 2011, the company’s U.S. subscriber base fell for the first time in years.
Then, Netflix stunned customers when it said it would rename its DVD business Qwikster and separate that business from the more lucrative streaming division. Customers raged so much that Netflix scrapped the idea less than a month later.
Hastings later said the miscues were a result of the company becoming “overconfident.”
