By Lisa Richwine
April 23 (Reuters) - Netflix Inc projected slower subscriber growth for its key U.S. video-streaming service, disappointing investors and sending its shares down 17 percent.
While Netflix reported a first-quarter loss that was not as steep as Wall Street projected, it warned that domestic streaming additions in the second quarter would be below that seen during the same period in 2010.
The stock plunged 17 percent to $84.85 in after-hours trading, down from a close at $101.84 on Nasdaq.
Despite predicting total U.S. streaming-subscriber additions in 2012 would be “about the same as in 2010,” the nearer-term guidance rattled investors, said Wedbush Securities analyst Michael Pachter.
Adding customers to the instant-streaming business is key to the company’s future as it moves away from mailing DVDs in its signature red envelopes.
“They are giving a signal to the Street their growth story is over,” said Pachter, who rates Netflix a “sell.”
Netflix never fully recovered credibility with investors after a price-hike and plan to hive off its DVD business — quickly abandoned — sparked cancellations by angry customers last year.
Once one of Wall Street’s highest-flying stocks, its shares dropped from $304.79 in July to $62.37 in November.
For the first quarter, Netflix posted revenue of $870 million, up 21 percent from a year earlier. The company had a net loss of $4.6 million or 8 cents per share in the quarter, versus a net profit of $60.2 million a year earlier.
Analysts had expected a loss of 27 cents per share, according to Thomson Reuters I/B/E/S.
The company added 1.7 million U.S. streaming customers in the quarter, while losing about 1.1 million U.S. DVD subscribers.
Netflix is facing growing costs to add movies and TV shows to its streaming business at the same time it expands into Canada, Latin America and Britain and has attributed its quarterly loss to start-up costs abroad.
On Monday, Netflix said it expected to return to profitability in the second quarter and launch in another European market in the fourth quarter of this year.
The move into another market may have added to concerns among investors, said Gabelli & Co analyst Brett Harriss.
“It’s very aggressive. I think investors are gun-shy from their last aggressive move” into foreign markets, said Harriss, who has a “hold” rating on Netflix.