In October, Netflix, (NASDAQ: NFLX ) reported disappointing Q3 subscriber growth and offered an uncharacteristically weak outlook for Q4 subscriber trends. Netflix stock had already been retreating from the all-time high of $489.29 it set in September, but the weak earnings report turned that retreat into a rout.
Netflix earnings estimates have also fallen based on the company’s Q3 results and Q4 guidance. In the past 90 days, the average 2015 EPS estimate among Wall Street analysts has dropped from $6.59 to $4.68. However, barring a sudden return to faster subscriber growth, Netflix’s 2015 earnings results will probably be even worse than what analysts are currently expecting.
Domestic growth is slowing
In Q3, Netflix added 0.98 million subscribers in the U.S. That was significantly less than the 1.29 million subscribers added in Q3 2013, and it fell far short of the 1.33 million net increase in domestic subscribers that Netflix had projected in July.
Management blamed the shortfall on the price increase that went into effect last spring. (New subscribers now pay $8.99/month, up from $7.99, while existing subscribers get to keep the old rate for 2 years.) Netflix also projected that slower member growth would continue in Q4, with net additions down from 2.33 million in Q4 2013 to 1.85 million.
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