Is Netflix done?

Yes, that’s the actual 3-month stock drop from Netflix current as of today. Remember when Netflix announced a 60% price increase? We all knew that would be a big mistake. Netflix tried to announce Qwikster, which of course failed. CEO Reed Hastings has apologized for nearly everything he has decided to do lately.

It’s getting old, really, and Netflix has declined since faster than it has ever grown.  Their shares traded around $75 for the first time in 18 months, a 36% plunge Tuesday that continues a dramatic tumble that has erased about $12 billion from the company’s market value in just 104 days. The declines follow Netflix quarterly earnings report, in which profit and revenue were up sharply but the video-rental company was haunted by its decision to raise prices and its admittedly botched effort to divorce rentals of DVDs from streaming video services. Those moves caused more than 800,000 subscribers to flee in the third quarter and removed a lot of goodwill with investors.

“We made a couple of big mistakes this year,” said Reed Hastings, Netflix’s chief executive. “It’s up to us to own up to those mistakes and to move forward.” Netflix added to investor concerns by projecting that it would begin losing money for a few quarters starting in the first period of 2012, because of costs associated with an expansion in the United Kingdom and Ireland. Following the company’s quarterly report Monday evening, Netflix shares were down 36% in Tuesday morning trading on the Nasdaq Stock Market, to $76. The stock is down more than 75% from its all-time high of $304.79 on July 13, the day after the company announced the price changes.

The outlook suggests Netflix has been unable to contain a subscriber revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services. The company now forecasts losses in 2012 because of costs to offer content in the U.K. and Ireland, and will delay further expansion until profitability is restored.

“Pausing is a good thing from an investor standpoint,” Chief Executive Officer Reed Hasting said in an interview. “We are going to pause and restore our global profitability.” Hastings, responding to questions, said he has no plans to step down and declined to comment on discussions with Netflix directors.

Author: Jason Zajdel

Learning as I go along. It’s an awesome ride. =-)