Netflix Second Quarter Shortfall Prediction Sends Stock Down

Apr 26th, 2011 | By | Category: Business and Finance

Mail-order and online movie rental service Netflix released its first-quarter results Monday and announced second-quarter profit projections that fell short of analyst expectations. The announcement sent Netflix stock falling $12.52, or 5 percent, to $239.15 in extended trading, as shares lost 55 cents to $251.67 at 4 pm New York time in Nasdaq Stock Market trading.

B132 Netflixenvelope Netflix Second Quarter Shortfall Prediction Sends Stock Down

Photo by BlueMint

Netflix, based in Los Gatos, California, is experiencing healthy growth. But costs related to international expansion are dampening profit projections.

Netflix is growing. After aiming to sign up 23.7 million new users by March, the company signed up 3.59 million new users to reach 23.6 million worldwide. Netflix is expected to surpass HBO in subscribers next year.

As a result of this growth, Netflix’s first-quarter sales rose 46 percent to $719 million, exceeding analysts’ projections of $706.1 million. Net income grew to $60 million, or $1.11 a share, up 59 cents from $32 million a year earlier. Analysts had predicted profit of $1.07 a share.

With this strong growth, second-quarter revenue had previously been projected at $767.5 million, with profit of $1.18 a share. But while sales are now projected at $798 million, net income is now projected to be $50 million to $62 million, or 93 cents to $1.15 a share.

One reason is that Netflix will be increasing its global expansion during the second quarter, expanding into two new countries and seeking film and TV rights outside the US, and this will cost more than expected. International operating losses, previously forecast at $50 million, are now forecast at $70 million.

During the second quarter, Netflix will also be focused on staving off competition from steaming services offered by Amazon and Hulu. Amazon recently released a new service to rival Netflix, while Hulu is expected to exceed 1 million subscribers and $500 million in revenue in 2011.

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