Shares of Netflix Inc. took a big hit Thursday after the movie rental company said it expected to lose 600,000 U.S. customers during the June-September quarter. Shares of Coinstar Inc., which operates Redbox DVD rental kiosks, jumped.
Many subscribers are quitting Netflix after the company's decision, announced on July 12, to separate subscription plans for streaming online video and DVDs sent in the mail. That raised prices by as much as 60 percent for some customers.
The change has met with considerable backlash for a company that had been a stock market darling. On July 11, Netflix shares closed up 65.5 percent for the year. They have plunged 41 percent in the past two months, dropping $37.08, or 17.8 percent, to $171.63 in late afternoon trading Thursday.
Some analysts seem worried that Netflix faces long-term problems.
"While Netflix's leadership in online streaming should remain uncontested for a long time, we believe that a combination of the recent price hike, a less favorable competitive environment, and aggressive international expansion" made the stock riskier for investors, wrote Jefferies analyst Youssef Squali in a note to investors. He kept a "Hold" rating on Netflix.
Squali said that video streaming site Hulu could become stiff competition for Netflix. Hulu's owners, The Walt Disney Co., News Corp., Comcast Corp. and private equity firm Providence Equity Partners, have put the site up for sale.
Meanwhile, shares of Coinstar rose $3.05, or 6.7 percent, to $48.27 Thursday. Coinstar's Redbox kiosks rent popular, new DVDs for $1 per day, but their selection is smaller than Netflix's library.
Netflix's decline didn't have much impact on shares of satellite TV company Dish Network Corp., which owns the Blockbuster chain of video rental stores. Dish shares fell 4 cents to $25.67. Netflix's rapid rise to success in recent years _ and Blockbuster's inability to keep up _ was a big reason Blockbuster entered bankruptcy protection last fall. Dish bought Blockbuster out of bankruptcy in April.
Netflix said Thursday that it expects to have 24 million U.S. subscribers in the July-September quarter, down from its July 25 guidance of 25 million subscribers. The company kept its earnings outlook and international subscriber forecast intact.
The Los Gatos, Calif., company had nearly 24.6 million U.S. subscribers at the end of June.