Netflix Stock Gains Ground After Renaming DVD Service Qwikster, CEO Apologizes
Netflix (NAS: NFLX) stock was trading higher Monday morning, hours after CEO Reed Hastings said the company would rename its DVD-by-mail service Qwikster, and apologized to subscribers for the way the company communicated its hike in subscription fees.
"It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to Qwikster," Hastings wrote in a blog post late Sunday. "We will keep the name Netflix for streaming," he added.
Netflix stock, which has lost nearly 50 percent of its value since the company announced in July that it would hike the rates for its DVD and streaming video services, gained a little ground on Monday. Netflix stock was trading at $159.88 at 10:15 a.m. ET, up $4.69, or 3.02 percent.
While Netflix build its brand on its DVD-by-mail service, the company has focused during the last three years on building its streaming video library, and has invested heavily in acquiring rights to hit TV series and movies. Its streaming video service has been popular with subscribers, but it turned off many customers with its increased subscription fees. Last week, Netflix said it expected to count 24 million total DVD and streaming video subscribers at the end of the third quarter, slashing its previous estimate of 25 million subscribers.
Goldman Sachs defended Netflix in a research note Monday. While lowering its 12-month price target on its stock from $330 to $270, the firm reiterated its buy rating on Netflix and noting that more than 40 percent of Netflix customers will subscribe to its streaming-only service by the end of the third quarter.
"We believe that Netflix experienced a forecasting error, underestimating the number of people leaving the service altogether due to the negative press surrounding the recent price increase," Goldman said.
It's been a rough few months for Netflix, but the company remains a threat to pay TV distributors with its streaming video service. It continues to reach new subscribers through connected TVs and devices such as Microsoft's Xbox, and remains an attractive option for some cable and satellite subscribers that could cut the cord on pay TV to rely on Netflix and other streaming video content for home entertainment.
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