News


Netflix under pressure to deliver ahead of results

Analysts expect Netflix to fail to stay on course to hit earlier subscriber targets when it reports results later today and several are questioning the impact the company’s international expansion is having on its financial performance.

Netflix boss Reed Hastings said earlier this year that the streaming and DVD delivery (in the US) business would add seven million customers in its domestic US market this year. The company will fail to remain on track to hit that number, according to a group of financial analysts surveyed by news wire service Bloomberg. Across the group surveyed, the average forecast increase was 1.43 million, shy of the 1.8 million required.

Investor website Seeking Alpha said that it is unlikely to hit its seven million target and anticipated Netflix revising subscriber targets accordingly.

“Given that the company has gained roughly 2.1 million in the first half of 2012, reaching seven million seems like a long shot,” it said, adding: “It is troubling for Netflix that not only several strong competitors such as Comcast, Amazon, Verizon etc. have sprung up, but also that it has lost some of the content due to issues related to renegotiation of prices.”

Influential credit ratings agency Moody’s also placed Netflix on review for downgrade earlier this month and said it will examine, among other factors, the impact the company’s international expansion will have on its performance.

“The review will weigh the benefits of diversifying into international markets against the financial and operating risks associated with entering new markets – which may have unique challenges, varying competitive landscapes and may require higher levels of investment or take longer to become profitable,” Moody’s said.

The US listed firm reports third-quarter results after the markets close later today.