Netflix (NFLX) has had its ups and downs in recent times and the latest chapter of the story was the disappointing earnings for the first quarter of 2012 and the guidance reported by the company. Netflix has posted its first quarterly loss in seven years for the first quarter of 2012.
Even though the loss was less than expected, the second-quarter estimate which warned of slowing subscriber growth through the summer weighed heavily on investing sentiment. As a result, analysts issued warnings about the stock which promptly tanked more than 13%. It is true that summer is historically a slow business period for Netflix because people tend to spend more time outdoors in preference to watching TV and videos indoors. However, the future outlook for the company is cloudy.
It certainly seems as if the subscriber growth story that made Netflix such an investor’s favorite is now beginning to run out of steam. Against the consensus estimate of adding about one million viewers to its services in the current quarter, the guidance of 190,000 to 790,000 viewers is disappointingly well below expectations. This has rattled investors because this disappointment comes on top of a number of problems that have started to surface. Though the company has said that it expects to add approximately 7 million viewers in the U.S. market in 2012, the target has been considered unrealistic and even ambitious.
A number of customers have already joined and then left because sales of video game consoles, which has been crucial to growth in the past, have now started to slow down.To continue reading, click here.