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Netflix Shares Drop Amidst Unclear 2012 Guidance

by Brandon Russell | November 22, 2011November 22, 2011 1:15 pm PDT

NetflixNetflix’s poor 2011 performance is leading to a less than favorable outlook in 2012, say analysts. The Los Gatos-based company’s shares are down 4 percent today after several analysts slashed their price targets for the content company heading into the new year. The culprit? Customer retention.

Analysts at Caris, Janney, UBS and Wedbush Securities all cited Netflix’s decision to raise prices and divide its streaming and DVD business into two as the biggest reason the company has lost a significant number of consumers. Of course, that crazy Qwikster idea was scrapped, but not before the damage had been done.

If we do not reverse the negative consumer sentiment toward our brand, and if we continue to experience significant customer cancellations and a decline in subscriber additions, our results of operations including our cash flow will be adversely impacted, a spokesman for Netflix said.

Until Netflix can adequately address the problem, 2012 could see the company post at a loss, a spokesman said. One obvious way it can combat losing net subscribers would be to buy and create more streaming content, and it seems the company is hard at work doing just that. Announced just a few days ago, Netflix says it plans on offering brand new, exclusive episodes of Arrested Development come 2013. That’s a good start, now what other good news do they have?

Netflix has struggled to maintain its popularity – strategic missteps, rising content costs, fierce competition – during the past six months, leading to a loss of nearly two-thirds of its market value since hitting $300 in July. To top it off, Reuters said the company didn’t provide a clear path heading into 2012, creating uncertainty with Wall Street.

Even though it’s more than a year off, will a deal like bringing Arrested Development to Watch Instantly revive the company? Let’s get some new episodes of Freaks & Geeks while we’re at it.


Brandon Russell

Brandon Russell enjoys writing about technology and entertainment. When he's not watching Back to the Future, you can find him on a hike or watching...