Netflix U.S. subscriber growth raises concerns
LOS GATOS, Calif. -Bingeing on Netflix (NFLX) could be losing some of its appeal in the U.S., even as the addiction rapidly spreads to other parts of the world.
The streaming-video service presented the latest snapshot of its steadily growing audience with Wednesday's release of its third-quarter earnings. The results were highlighted by the addition of 3.62 million million subscribers during the three months ending in September.
Netflix has picked up 16 million more subscribers during the past year alone, leaving the service with 69 worldwide customers through September.
But it didn't gain as many subscribers in its key U.S. market during the latest quarter as management anticipated, a shortfall it blamed on an unusually large number of accounts that were canceled because their credit cards couldn't be charged.
For the third quarter, Los Gatos, California-based Netflix reported a profit of $29.4 million, or net income of 7 cents per share.
Those results met Wall Street expectations. The average estimate of 17 analysts surveyed by Zacks Investment Research was also for earnings of 7 cents per share. However, revenue for the quarter fell short of forecasts, coming in at $1.74 billion in the period. Twelve analysts surveyed by Zacks expected $1.75 billion.
The revenue shortfall and the disappointing subscriber growth in the U.S. raised fears among investors that Netflix may be starting to have trouble attracting more subscribers in its biggest market as it faces tougher Internet-video competition from Amazon (AMZN), Hulu and an online-only application from pay-TV provider HBO.
Investors' immediate reaction was to sell. Netflix shares plummeted around 14 percent in the minutes after the earnings announcement. By 5:10 p.m. ET, the drop had eased, with shares losing around 4 percent, or $4.20, to trade around $106.
Netflix shares have more than doubled since the beginning of the year, while the Standard & Poor's 500 index has decreased 3 percent. In regular hours trading on Wednesday, shares closed at $110.23, an increase of 71 percent in the last 12 months.