Streaming outlook hits Netflix shares

Netflix Inc. projected slower subscriber growth for its key U.S. video-streaming service, disappointing investors and sending its shares down 17 per cent.

While Netflix reported a firstquarter loss that was not as steep as Wall Street projected, it warned that domestic streaming additions in the second quarter would be below that seen during the corresponding period in 2010.

The stock plunged 17 per cent to $84.85 in after-hours trading, down from a close at $101.84 on Nasdaq.

Despite predicting total U.S. streaming-subscriber additions in 2012 would be “about the same as in 2010,” the nearer-term guidance rattled investors, said Wedbush Securities analyst Michael Pachter.

Adding customers to the instant-streaming business is key to the company’s future as it moves away from mailing DVDS in its signature red envelopes.

“They are giving a signal to the Street their growth story is over,” said Pachter, who rates Netflix a “sell.”

Netflix never fully recovered credibility with investors after a price hike and plan to hive off its DVD business — quickly abandoned — sparked cancellations by angry customers last year.

Once one of Wall Street’s highestflying stocks, its shares dropped from $304.79 in July to $62.37 in November. For the first quarter, Netflix posted revenue of $870 million, up 21 per cent from a year earlier.

The company had a net loss of $4.6 million or 8 cents per share in the quarter, versus a net profit of $60.2 million a year earlier.

Analysts had expected a loss of 27 cents per share, according to Thomson Reuters.