UPDATE, 2:10: PM: Netflix closed at $60.28, which is -25.02% – and its lowest closing price over the last 52-weeks. During the trading day it also touched $59.20, the lowest intra-day price for the last 52 weeks. Trading volume was unusually heavy, at 24.7M shares; that’s the fourth biggest trading day for Netflix over the last year. Netflix’s stock began its dizzying decline shortly after July 12, 2011 when it announced that it would split its DVD rental and streaming businesses — and require consumers to pay 60% more to receive both services. The day after that announcement it closed at $298.73.
PREVIOUS, 10:21 AM: Company shares are down more than 25% at midday, and are close to a 52-week low. The plunge follows Netflix’s earnings report last night that warned it could fall short of its hoped-for 7M gain in domestic streaming subscribers for 2012. The company also said it expects to report a loss in Q4 as it invests to expand in another overseas market. B. Riley’s Eric Wold downgraded Netflix to “sell” this morning — and reduced his price target to $50 from $80 — saying that he’s “concerned that [Netflix] is expanding too quickly within int’l markets as domestic competition ramps.” Others lowering their target prices include J.P. Morgan’s Douglas Anmuth (to $63 from $87), Barclay’s Anthony DiClemente ($80 from $95), Janney Capital Markets’ Tony Wible ($53 from $67), Credit Suisse’s John Blackledge ($100 from $115), and Susquehanna Financial Group’s Vasily Karasyov ($70 from $95). Bernstein Research’s Carlos Kirjner is sticking with his $71 target but says he’s “not convinced that the domestic streaming business is profitable enough or even that the current profitability path is sustainable to justify the company’s aggressive pursue of its global ambitions. To a large extent, what is really funding the global expansion is the ‘mothballed’ and declining DVD business, which generated the majority of contribution profits.” Netflix’ market value is down 13.5% so far in 2012, and -78.7% over the last 12 months.
Related: Netflix Shares Fall After It Forecasts Losses From Overseas Expansion
In early trading Netflix shares are down about 3.3% from yesterday’s $74.47 close – and flirting with the possibility of ending the day at a new 52-week low. Investors are still trying to make sense of last night’s announcement that it struck two deals to raise $400M, with a warning that it expects a net loss in 2012. That’s a change from its previous guidance to expect “several quarters” of losses. The company agreed to sell $200M in common stock, at $70 a share, to accounts managed by T. Rowe Price Associates in addition to its $200M convertible notes offer to Technology Crossover Ventures. With the deals “we have strengthened our balance sheet and remain focused on growing our streaming subscriptions and returning to global profitability after our launch of the U.K. in 2012,” CFO David Wells said.
But several analysts say that they’re pessimistic: Caris & Co’s David Miller lowered his price target to $59 from $77 since Netflix “is sending the rhetorical signal to the Street that the effects of its Q3 public relations nightmare have not stemmed subscriber defections, at least not in the near term.” Lazard Capital Markets’ Barton Crockett says his earnings forecast is under review adding that the company’s “recent history of quick outlook changes suggests reason to be skeptical.” Janney Capital Markets’ Tony Wible questions Read More »
Netflix is in for a brutal morning: The stock is down 35% in pre-market trading from its $118.84 close yesterday as some influential Wall Street analysts tell investors it’s time to dump the stock following last night’s disappointing earnings report and forecast. Susquehanna Financial Group’s Vasily Karasyov downgraded Netflix to “negative” from “neutral.” He says that it “looks like the nuclear winter scenario is playing out” for the company as “subscriber base expansion in the U.S. appears to be minimal and losses from international launches are weighing on profitability.” The combination will “put to rest the bull case on (Netflix) as we know it.” Janney Capital Markets’ Tony Wible also downgraded the stock to “sell” – and slashed his price target in half to $51. Calling the company’s business model “unsustainable” he says: “Fundamentals are eroding, management credibility is shot, international growth is deteriorating, and margins are imploding. Furthermore, the company’s disclosures support our view that the DVD business accounts for a disproportionate amount of (Netflix’s) profits (82%),” which means investors should look at it as an old-fashioned rental company instead of a digital-age power. Even Netflix supporters are retrenching. Read More »
UPDATE, 5:30 PM: It looks like the deal Netflix announced this morning to expand into the UK and Ireland will take its toll on the company, which said during its post-earnings conference call with analysts that … Read More »