Netflix shares plummet on lower quarterly outlook

Shares of movie rental service Netflix take a 13 percent hit in early-morning trading after the company lowers its outlook for fourth-quarter revenues and subscriber levels.

Netflix reduced its guidance for fourth-quarter revenue and subscribers on Monday, noting that the economic climate may be taking its toll on its movie rental business.

Shares of Netflix plummeted 13 percent in intraday trading, to as low as $25.19 per share.

In sizing up the fourth quarter, which began this month, Netflix is forecasting weaker than anticipated results. The number of subscribers is expected to be in the 8.95 million to 9.25 million range at the end of the year, compared with the company's earlier forecast of 9.1 million to 9.7 million.

Revenue, as a result, is expected to come in at a lower range, between $353 million and $359 million, compared to its earlier forecast of $357 million to $367 million. Net income, however, is expected to remain unchanged from the company's previous forecast of $18 million to $23 million for the fourth quarter.

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Meanwhile, Netflix is preparing to report the financial results of its third quarter on October 20.

For the quarter ended on September 30, the number of subscribers fell to 8.672 million, compared with the company's earlier projections of 8.675 million to 8.875 million subscribers.

"Net subscriber growth in July was in line with expectations, but August was unusually weak," Barry McCarthy, Netflix's chief financial officer, said in a statement. "In September, the business regained momentum, with results slightly below original expectations, likely due to the economic climate."

The company's third-quarter revenues, however, are expected to remain within the range of its previous guidance of $343 million to $348 million--excluding the one-time $6.5 million credit it issued to subscribers after a service interruption in August .

 

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