Netflix Inc.’s share price down, third-quarter subscriber growth misses initial company’s forecasts

Netflix Inc. said in a report that its subscriber growth over the third financial quarter failed to reach the initial companys projection due to the fact that new contracts for its video-streaming service were affected by a recent price increase.

The Chief Executive Officer of the company, Reed Hastings, and Chief Financial Officer, David Wells, said in a letter to Netflix shareholders, cited by Bloomberg: “As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago. Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher-adoption markets such as the U.S.”

The U.S.-based company noted that 980 000 monthly subscribers were added in its home market over the period. This result was lower than the growth forecast, which amounted to 1.33 million new accounts. The company subscriber growth in international markets was also lower than the initial projections, despite that Netflix has been following an aggressive expansive strategy. The monthly accounts added in the companys international markets amounted to 2.04 million, while Netflix had forecast a growth of 2.36 million new additions.

Netflix also revealed its growth projection for the fourth quarter of the fiscal year, saying that its domestic growth is expected to continue slowing down over the period. The company said it expects a total of 1.85 million new monthly subscriptions. This forecast is considerably lower in comparison to the 2.33 million new customers added over the same period a year ago.

Michael Pachter, an analyst at Wedbush Securities, commented for the Wall Street Journal: “The Netflix myth is they’re going to get to 120 million subscribers. But if growth is slowing, it looks like it will take them a lot longer to get there.”

Netflix Inc. was 0.12% down to close at $448.59 per share yesterday, marking a one-year increase of 39.45%. The company is valued at $26.99 billion. According to CNN Money, the 36 analysts offering 12-month price forecasts for Netflix Inc. have a median target of $500.00, with a high estimate of $600.00 and a low estimate of $245.00. The median estimate represents a +11.46% increase from the last price of $448.59.