Netflix Inc. (NFLX) shares sank Thursday on slower subscriber growth and fears of increased competition ahead.
The world's largest Internet video service provider said late Wednesday that its subscriber growth for the third quarter lagged well below management forecasts and it pointed to a recent $1 a month price increase in the U.S. as the cause.
Adding to its woes are plans from rival HBO to add an Internet-only package in the U.S. next year. Netflix added 3 million worldwide subscribers during the three months ending in September. Those gains were short of management's projection of an additional 3.7 million subscribers for the period. In the U.S., Netflix added about 1 million subscribers, missing the target of 1.3 million. Shares fell 22 percent to $348.76 by midday Thursday. Its stock hasn't traded at levels this low since May.
The sell-off may give investors an unwelcome reminder of the beating Netflix took in 2011 after it raised prices. The company lost 800,000 subscribers and its stock slumped 80 percent for the year, although it eventually bounced back. Customer reaction hasn't been anywhere as harsh this time and the price hike not as large.
The 13 percent increase only affects subscribers who signed up since May. Prices for households with subscriptions prior to the price increase remain at $8 per month in the U.S. through May 2015.
Cantor Fitzgerald analysts said in a research note that the price hike's effect on subscriber growth was surprising, but suggested it may reflect a lack of pricing power for the company. But they reiterated a "Buy" rating on shares.