NEW YORK ( TheStreet) -- Netflix (NFLX) shares have lost more than 70% in the past three months. As it continues to take a bloodbath this morning following its disappointing third-quarter earnings report, how much farther can it fall?
Netflix has become a real gamble, as visibility into the fourth quarter and 2012 has become increasingly blurry.
The company's recent slip-ups have put significant pressure on its U.S. subscriber base, ending the quarter with 23.8 million domestic users. This was below its revised forecast of 24 million U.S. subscribers.And subscriber attrition isn't expected to wane, with Netflix foreseeing domestic subscribers between 20 million and 21.5 million in the fourth quarter. Netflix's profitability in the fourth quarter remains anyone's guess, with management predicting a wide earnings range of 36 cents to 70 cents a share. On top of this, Netflix also indicated it will operate at a loss starting in the first quarter of 2012 and doesn't expect to return to profitability for a few quarters due to costs associated with expanding into the U.K. and Ireland. As a result, Netflix will hit the pause button on international expansion until it can grow overseas profitably, CEO Reed Hastings said in a letter to shareholders. There are also competitive pressures from players entering the market, including Amazon (AMZN), which has been aggressively beefing up its streaming content through its Prime membership. A bevy of analysts downgraded the stock following the report. "We believe the Netflix mode is unsustainable, as the company faces rising costs that it hoped it could pass onto its subscribers, which appear unwilling to do so. The company has paid exorbitant prices for content, while painting itself as a cheap rental service. Simply put, the company's brand does not fit with its large/growing content obligations. Netflix's attempts to rebuild faith in the company have failed and investors will likely be reluctant to believe any good news (if any were out there), as management has lost the benefit of the doubt," Janney Capital Markets analyst Tony Wible noted. Wible downgraded the stock to sell. Given all of this, where do you think Netflix's stock will end the year? Take our poll and see what TheStreet readers are saying.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV