Netflix Shares Tumble on Revised Subscriber Growth

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UPDATED: The company's controversial price increase will cost it about 1 million subscribers.

Shares of Netflix collapsed 19 percent Thursday after the company acknowledged that its controversial price hike of 60 percent on one of its most popular plans might cost it 1 million subscribers.

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The company on Thursday cut its subscriber estimates for the end of the third quarter to 24 million in the U.S., while it had forecast two months ago it would end the quarter with 25 million subs.

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Shares of the formerly highflying stock lost $39.46 to $169.25 Thursday and are off more than 40 percent since Netflix announced its price hike in mid July. The stock is lower than where it started the year at, but still up nearly 300 percent in the past two years.

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Netflix has mostly been a Wall Street darling, with many analysts even bullish over the price hike. Recently, though, bears have been more vocal in their opinion that the stock was headed for a fall, especially since the price of acquiring content for streaming has risen roughly ten-fold in the past three years or so.

While problematic for Netflix, the dramatic rise in the value of rights to stream TV shows and movies over the Internet is a boon to content creators. On Thursday, for example, forecasters at Trefis said Time Warner shares should rise to $38.90 because Netflix and its competitors need its content. Shares of TW rose more than 3 percent Thursday to $30.89.

One of Netflix's more consistent bears, Tony Wible of Janney Capital Markets, reiterated his "sell" recommendation on the stock Thursday, noting that CEO Reed Hastings and other top executives have sold $68 million of their stock in the past six months, mostly through options exercised at $1.50 a share. Hastings, said Wible, has been selling between $1 million and $1.5 million in stock on almost a weekly basis for several months.

Barton Crockett of Lazard Capital Markets also weighed in Thursday with worries that a Hulu buyer "could potentially lock up exclusive TV rights" from partners Disney, NBC and Fox, leaving Netflix out in the cold.

Crockett also called Netflix's guidance redo "a rare, large and surprising misstep."


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