Netflix shares plunged more than 15% in after-hours trading Tuesday as the company offered weak guidance for the fourth quarter and reported figures for new streaming subscriptions that fell well short of expectations.
For the third quarter, Netflix reported sales of $905 million, in line with expectations. Net income came in at $8 million, with earnings at 13 cents a share, ahead of the analysts’ estimates of a profit of four cents per share.
But new domestic streaming subscriptions, the engine of Netflix’s expansion efforts, were a disappointing 1.16 million, placing the company’s goal of 7 million total this year in doubt.
Analysts from JPMorgan said in a research note last week that they expected the company to add 1.56 million subscribers in the third quarter.
Back in July, Netflix said it would be “challenging” to meet its goal of 7 million new streaming subscribers in the United States this year if subscribers didn’t come in strong in the third quarter. At the time, Hastings warned that the Olympics could have a negative impact on viewing and sign-ups.
Netflix has warned previously that it will lose money this year as it expands internationally. Last week, the company launched its streaming service in Scandinavia, having introduced it in the United Kingdom and Ireland earlier this year.
The company said the midpoint of its sales guidance for the fourth quarter was around $930 million, short of analysts’ projections of $942 million. The company also said it may lose as much as 23 cents per share in the fourth quarter. Wall Street had been predicting a loss of 8 cents per share.
Another key concern for Netflix is how much it will have to shell out to retain its catalog of TV and film titles. The company is also facing competition in streaming from HuluPlus and Amazon Prime Instant Video, with Verizon’s and Coinstar’s Redbox Instant service set to launch by the end of the year as well.
