Just how much self-inflicted damage has Netflix (Nasdaq: NFLX) suffered?
Pacific Crest analyst Andy Hargreaves contends that its price increase, poor communications with customers and sudden about face Monday on Qwikster, its plan to spin off its DVD-by-mail business, has done enough harm to the brand that it's likely to slow subscriber growth and reduce earnings... for a while.
In a client note, Hargreaves dropped his earnings outlook for 2012 to $6.26 from $6.57 per share and estimated 2013 earnings at $8.17 per share, which is based on 44.5 million global streaming subscribers.
Netflix already warned it expects to lose 600,000 subscribers by the end of September because of the price increase, and the Qwikster decision may have accelerated those defections, Hargreaves said.
"Netflix's price change and subsequent Qwikster launch did meaningful brand damage that likely reduced subscriber additions and will take time to repair," wrote Hargreaves, adding that the decision to kill Qwikster "provides evidence that net subscriber additions late in the third quarter and early fourth quarter were below the company's expectations."
Despite the downward revision, Hargreaves said Netflix could still see massive growth, reaching 62 million global streaming subscribers by the end of 2016.
Netflix stock has lost about 63 percent of its value in the past three months.
- see this Bloomberg article
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