Netflix Expects Losses to Continue in 2012

Netflix (NASDAQ:NFLX) shares plunged today after the company announced it expects losses in 2012, and will delay global expansion plans because of faltering results in the U.S., its first and largest market. In its quarterly earnings report yesterday, the company predicted losses for “a few quarters” in 2012.

Investing Insights: 5 Super Hot Stocks: Netflix Plunges, 3M Drags on Dow, Amazon and DuPont Trading Higher

Netflix shares have dropped nearly 37% this morning, now trading at $75.44. The company has surrendered more than $10 billion in market value since hitting an all-time closing high of $298.73 on July 13.

As competition in the streaming-video business rises, with Amazon (NASDAQ:AMZN) in particular upping its game, Netflix is now facing rising content costs that forced it to increase pricing, which led to customer revolt and a large exodus. Not to mention, the company is facing startup costs as it expands into Latin America this year, and plans to expand in the the U.K. and Ireland in early 2012, which it just announced yesterday. Chief Executive Officer Reed Hastings said other new markets will have to wait.

As the result of many customers cancelling their subscriptions following the price hikes and an abandoned plan to split Netflix’s streaming from its mail-order DVD service, domestic customers this quarter will fall short of the 24.9 million analysts had forecast. “We’ve definitely had our stumbles,” said Hastings in an interview. Slowing down the expansion “is a good thing from an investor’s standpoint.”

Streaming subscriptions are forecast to decline this month, remain flat in November, and rebound in December to end between 20 million and 21.5 million, according to a statement on the Netflix website. DVD subscriptions are expected to fall “sharply” from 11.3 million customers to 10.3 after the new pricing scheme increased the price of the most basic DVD package by 60%.Fourth-quarter profit is expected to be between $19 million and $37 billion, or 36 cents to 70 cents a share, on revenue of as much as $875 million. Analysts had been expecting profit of $1.10 a share on sales of $919 million, according to Bloomberg. During the same quarter last year, Netflix earned $47.1 million, or 87 cents a share, on sales of $595.9 million.Don’t Miss: Netflix Expanding Streaming Service to U.K. and Ireland

Netflix reported net income rose 65% in the third quarter to $62.5 million, or $1.16 a share. Sales were up 49% to $821.8 million, beating expectations of $812.8 million.

More from The Cheat Sheet