Mike Snider

USA TODAY

Netflix shares dove late Monday after an outlook in its quarterly financial report indicated an ongoing price hike is likely to cool user growth.

Netflix (NFLX) shares dropped 10% in aftermarket trading to $98.50, extending a 3% loss in Monday's regular session.

The streaming video provider expects to add less than half as many subscribers as it did during the first quarter, about 2.5 million, with one-fifth from the U.S. and the rest globally, it said in the report.

"A modest effect from the beginning of the un-grandfathering" and tougher international growth comparisons leads to the lowered forecast for the second quarter, Netflix CEO Reed Hastings said in a letter to shareholders.

Amazon targets Netflix with standalone video sub

Next month, many members – possibly as many as 17 million, according to USB Investment Bank — will begin seeing a $2 monthly increase to its most popular subscription plan, upping their monthly bill to $9.99. Netflix announced the increase two years ago and had grandfathered long-term customers with the lower price.

That increase will help Netflix increase its spending on content from $5 billion this year to $6 billion next year, CEO Reed Hastings said.

The outlook on subscribers, the most important metric for investors given the stock's 300% rise in the past three years, overshadowed results for the first three months of the year.

Netflix earnings surpassed Wall Street's earnings expectations, and it added more subscribers than expected. Revenue slightly missed expectations.

After Netflix announced its financials, S&P Global Market Intelligence equity analyst Tuna Amobi lowered its price target on Netflix by $8 to $120 citing "stronger-than-expected U.S. and international gains ... even as Q2 guidance was notably muted, amid an imminent U.S. price change.

The company also faces additional competition from Amazon, which announced Monday that it is offering Amazon Video as a standalone subscription service. It previously was only available as part of Amazon's $99 annual Prime service, which includes free shipping and other features. At $8.99, Amazon Video is $1 cheaper than Netflix's most popular $9.99 monthly plan for two concurrent HD video streams.

Netflix CEO Hastings called the Amazon move "all part of the natural evolution from linear TV to Internet TV," he said on a videoconference Monday after the company released its financials. "It's natural that everybody is coming in as they realize that the future is Internet TV."

The Net TV company reported revenue of $1.96 billion and 6 cents a share in earnings, barely missing the consensus estimate of $1.97 billion in revenue, but surpassing the 3 cents a share in earnings from analysts polled by S&P Global Market Intelligence. Netflix had forecast revenue of $1.966 billion, up 25% from the same period last year.

Netflix's subscriber growth in January through March was 6.7 million new subscribers -- to a total of 81.5 million -- beating its own forecast of an addition of 6.1 million net subscribers. More than 4 million came from outside the U.S., a benefit of Netflix's expansion earlier this year into 130 additional countries earlier this year.

Netflix reported net income of $28 million, compared to $24 million in the same period last year. But Netflix forecast net income next quarter of $9 million, compared to $26 million in the same period last year.

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