By Troy Wolverton

twolverton@mercurynews.com

LOS GATOS — Shares of Netflix (NFLX) plunged 25 percent on Wednesday as numerous analysts slashed their earnings forecasts, lowered their ratings or reduced their price targets on the company’s stock in the wake of its earnings report on Tuesday.

At least three analysts changed their ratings on the company’s stock from a “buy” to a “hold” or a “sell” in the wake of Netflix’s report, according to Thomson Reuters.

The company’s stock was $60.28 at the close in New York.

On Tuesday, the company’s stock dropped nearly 16 percent in late trading after the company posted weak subscriber growth and warned of future losses that call into question analysts’ forecasts for next year.

As part of its second-quarter report, which included a 91 percent drop in earnings, the Los Gatos company warned that it may not meet its previously stated goal of adding 7 million new U.S. streaming video subscribers this year, after adding a paltry 530,000 new subscribers in the second quarter. The company also warned that it might post losses in both its third and fourth quarters thanks to a costly international expansion of its streaming video business.

Netflix’s bottom line is likely to finish somewhere around break even for the year, said Michael Pachter, a financial analyst with Wedbush Securities. Meanwhile, the company continues to lose subscribers to its DVD business, which provides the bulk of its profits.

It’s unlikely that the company will meet Wall Street’s expectations of a $2.13 per-share profit for next year, Pachter said. And if it can’t hit that target, its price has to come down, he said.

“It’s becoming clear to people that $2 (profit) figure is fricking wrong,” said Pachter. “The company is overvalued. That’s why it’s down.”

The online movie company announced Tuesday it earned $6.2 million, or 11 cents a share, in its most recent quarter. That was down sharply from the $68.2 million, or $1.26 a share it earned in the same period a year earlier.

But it was up from the first quarter, when the company posted a $4.6 million, or 8 cents a share, loss, a rare trip into the red for Netflix.

The company’s sales in the second quarter were up 13 percent from the year-ago period to $889.2 million.

The results topped Wall Street’s expectations. On average, analysts polled by Thomson Reuters were expecting the company to earn 5 cents a share in the quarter on sales of $888.9 million.

But the company clearly faced challenges. Its international business posted an $89 million segment loss in the quarter, helping to bring down its overall results. Netflix also continued to shed DVD subscribers. The total number of DVD customers fell to 9.2 million by the end of the quarter, down 850,000 from the previous period. The company has lost about 5.8 million DVD customers since last summer, when it raised prices as much as 60 percent and announced, and then canceled, a move to rename and spin off that business.

Despite those customer losses, Netflix’s DVD business posted a $133.8 million segment profit in the quarter. The U.S. streaming business, which now has 23.9 million customers, posted an $83.1 million profit.

Netflix doesn’t include technology, development or administrative costs when it calculates the segment profits of its business divisions. If those costs are included, Netflix’s U.S. streaming business would probably show a minuscule profit, if it was able to show one at all, Pachter said.

Netflix forecast that it would add 1 million to 1.8 million U.S. streaming subscribers in the third quarter but said that it would have to hit the top of that range to be on target for its annual goal.

In a statement issued Tuesday, CEO Reed Hastings and Chief Financial Officer David Wells touted the company’s return to profitability in the second quarter, noting that Netflix’s results exceeded the guidance they gave last quarter. They also argued that the company’s international expansion, which led to the company’s loss in the first quarter and could lead to losses in the next two quarters, is the best thing for Netflix’s long-term business.

“We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television,” Hastings and Wells said in the statement. We are making progress in every market we serve, and see a once-in-a-generation opportunity ahead to build the world’s most popular TV show and movie service.”

In the current period, the company expects its bottom line to range from a loss of $6 million, or 10 cents a share, to a profit of $8 million, or 14 cents a share. It forecast sales ranging from $890 million to $911 million. Before the report, analysts had forecast that Netflix would earn 11 cents a share in the third quarter on sales of $905.9 million.

Contact Troy Wolverton at 408-840-4285. Follow him at Twitter.com/troywolv.