Updated from 5:08 p.m. EDT to disclose Carl Icahn's updated position on Netflix in second paragraph.
NEW YORK (TheStreet) -- Netflix (NFLX) CEO Reed Hastings warned against "momentum investor-fueled euphoria" in the company's third-quarter shareholder letter and investors took note. High-momentum stocks slipped to close lower on Tuesday but none so far as Netflix, which only 6 hours earlier was soaring to record heights on solid third-quarter earnings.
And the day went from bad to worse as billionaire investor Carl Icahn disclosed he unloaded 2.4 million shares, cutting his stake in the company to 4.52% from the 10% in his portfolio a year earlier. In an SEC filing, the reason given for Icahn partial exit of his investment was "in view of the 457% increase in the price of those shares since the original investment".
In after-hours trading, shares slumped 2.2% to $315.50. Shares of the streaming service tumbled 9.2% to $322.52, shedding $65.32 since market open. During the day, 25.51 million shares changed hands, seven times the stock's average three-month daily volume of 3.5 million.
Investors were taking their profits, despite third-quarter earnings of 52 cents a share that beat analyst expectations by three cents in a Thomson Reuters survey. Netflix said it ended the quarter with more than 40 million members, up from less than 30 million a year earlier.
A possible contribution to fears was the degree to which the 1.4 million new international members were the result of "low quality free trials" in Latin America and how this could affect long-term member totals and profitability. The international unit lost $74 million in the quarter, compared to $92 million in the year-ago quarter. The Los Gatos, Calif.-based company anticipates a loss of $65 million in the fourth quarter.