Netflix Hammered on Guidance
Updated from 8:58 a.m. EST
Updated guidance from
Netflix
(NFLX) - Get Report
Monday accomplished what a negative story in
Barron's
couldn't -- a rout.
Netflix was recently down $4.14, or 12%, to $30.88 after the company predicted its first-quarter loss would be between $5.6 million and $8.1 million. The estimate, which is considerably wider than its previous forecast, reflected a higher marketing expense related to increased subscriber growth.
The widened loss estimate eclipsed some supposedly good news on the subscriber front, where the DVD-by-mail outfit said first-quarter percentage growth would exceed the growth rate in each of the prior four quarters. Netflix expects to end the period with 1.86 million to 1.94 million subscribers, up from its old estimate of 1.75 million to 1.83 million.
The company also predicted first-quarter gross margin of 43% to 45%, down from its previous estimate of 44% to 46%, and a first-quarter customer defection rate of 4.7% to 5.2%, down from 4.8% to 5.3%.
Netflix shares had largely weathered a negative
Barron's
story Monday before being halted after the bell ahead of the business update. After closing Friday at $35.38, Netflix ended regular trading Monday at $35.02. The
Barron's
article raised points similar to those highlighted for months by Herb Greenberg on
TheStreet.com's
subscription sister site
Street Insight
, including potential category-killing competition and a hard-to-sustain subscriber-acquisition model.