Netflix ,"Big Mistakes this Year"

The declines follow Netflix quarterly earnings report, in which profit and revenue were up sharply but the video-rental company was haunted by its decision to raise prices and its admittedly botched effort to divorce rentals of DVDs from streaming video services.

"We made a couple of big mistakes this year," said Reed Hastings, Netflix's chief executive. Following the company's quarterly report Monday evening, Netflix shares were down 36% in Tuesday morning trading on the Nasdaq Stock Market, to $76. Despite the rapid declines, Netflix shares are still considered pricey, trading about 17 times earnings expected for the current fiscal year, according to FactSet Research, a multiple that is higher than Apple Inc., 12 times, and Google Inc., 16 times.

Janney Capital Markets analyst Tony Wible, a longtime critic of Netflix, said the stock remains expensive and "mispriced by value standards."
"The company has paid exorbitant prices for content while painting itself as a cheap rental service."
"The growth in Netflix's installed base of subscribers does not appear to be growing fast enough to cover the growth in streaming content costs," Needham analyst Charlie Wolf said. "However, the company plans to forge ahead with even larger streaming deals in 2012."

Netflix noted Monday that it has "dramatically more content than any other subscription service or network," a point that keeps Citigroup Global Markets analyst Mark Mahaney—who downgraded the stock to neutral—from going completely negative on Netflix.

Strategy indecision and dowdy profit predictions have seen Netflix shares plunge overnight, as the company reaps a lackluster harvest on its 800,000 subscriber loss.
Losses were expected, to some extent – Netflix had downgraded its expectations to 21.8m streaming-only subscribers and 14.2m DVD subscribers – but the actual figures announced, of 21.5m streaming and 13.4m DVD, still surprised the market.

Only 7-percent of new subscribers opt for a DVD package, Hastings also revealed.
Netflix Inc., the DVD and video- streaming company, plunged after projecting losses in 2012 and delaying global expansion plans because of faltering results in the U.S., its largest market.

Netflix tumbled 27 percent to $87 in extended trading yesterday after predicting losses for “a few quarters” in 2012. The company faces rising content costs, a customer revolt over a price increase and startup costs as it expands into Latin America, followed by the U.K. and Ireland in early 2012. As a result of cancellations, domestic customers this quarter will fall short of the 24.9 million analysts forecast.

 The outlook suggests Netflix has been unable to contain a user revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services.
Hastings also downplayed the likelihood of a big increase in marketing efforts to restart domestic subscriber growth.
Fourth-Quarter Outlook

Analysts were projecting profit of $1.10 a share on sales of $919 million, according to Bloomberg data. For the third quarter, Netflix reported net income rose 65 percent to $62.5 million, or $1.16 a share. Analysts projected 95 cents, the average of 25 estimates. Netflix had projected a loss of 600,000 users to end the third quarter at 24 million. The company’s total subscriber count, including service in Canada and Latin America, fell to 25.3 million from 25.6 million