By Dunstan Prial
The honeymoon looks to be over for Netflix (NASDAQ:NFLX) and its investors, and the breakup is getting messy.
Its shares were down 43% Tuesday after a third-quarter earnings report on Monday that put numbers to Netflix’s recent woes. Not only is the on-demand video company bleeding customers, it expects to lose money in early 2012 as it rolls out expansion plans in Europe.
The stock has now plunged 75% from its all-time high of $305 earlier this year. On the way down, Netflix’s market value has fallen to under $4 billion from more than $16 billion.
Its fall from grace — from the Nasdaq’s biggest stock market gainer of 2010 to a virtual pariah — has been abrupt but not that surprising.
Competition was heating up for the Internet-based, mail order video provider even before it announced an ill-timed and apparently badly-thought-out plan to separate its mailing service from its online-streaming operation.
As if that wasn’t head-scratching enough, the company dramatically raised its prices.
Once-loyal customers are now leaving in droves, a point Netflix acknowledged Monday in its earnings report. The company said it lost 800,000 subscribers in the third-quarter alone.
On Tuesday, Goldman Sachs confirmed what most investors seemed to already be thinking, cutting Netflix shares to neutral from buy and slashing its 6-month price target to $75 from $200.
