Netflix profit grows, shares drop on subscriber numbers

LOS ANGELES Mon Jul 22, 2013 6:17pm EDT

The Netflix logo is is shown on an ipad in Encinitas, California, April 19,2013. REUTERS/Mike Blake

The Netflix logo is is shown on an ipad in Encinitas, California, April 19,2013.

Credit: Reuters/Mike Blake

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LOS ANGELES (Reuters) - Video subscription service Netflix Inc signed up fewer-than-expected new customers for its streaming service in the second quarter, sending its shares tumbling by nearly 6 percent on Monday despite a higher-than-expected profit.

Netflix beat analysts' forecasts with $29 million in second-quarter profit and earnings per share of 49 cents, but said it added 630,000 new streaming customers in the United States, in the middle of a forecast the company issued in April.

"The stock was priced for perfection going into the quarter, hence the sell-off," Evercore Partners analyst Alan Gould said. "They didn't beat on the subscriber numbers."

The average expectation of Wall Street analysts was 700,000, Sterne Agee analyst Arvind Bhatia said.

Shares of Netflix fell 5.8 percent in after-hours trading on Monday to $246.78, down from their earlier $261.96 close on the Nasdaq.

Netflix shares have soared 183 percent this year, setting a high bar the company's quarterly results, analysts said.

The May release of comedy "Arrested Development" generated a "small but noticeable bump in membership," Chief Executive Reed Hastings and Chief Financial Officer David Wells said in a letter to shareholders.

The company generated buzz from last week's Emmy nominations for "Arrested Development" and an original series, political thriller "House of Cards," the first Internet series to garner Emmy nods in major categories.

Netflix, in its shareholder letter, forecast it will add up to 1.5 million U.S. streaming customers in the current quarter. That guidance "looks like a little light," Gabelli & Co analyst Brett Harriss said. "Netflix needs to add a substantial amount of subscribers to justify the current valuation."

The company reported 29.8 million U.S. streaming customers at the end of June, and 7.8 million international streaming customers.

(Reporting by Lisa Richwine and Liana B. Baker; Editing by Ronald Grover and Steve Orlofsky)

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