Netflix shares slip as subscriber numbers lag investor dreams

Netflix Inc stock is set to open around 4 percent lower after the online entertainment company reported less-than-expected quarterly subscriber growth, undermining investor hopes for a dream run from its own programs.

The shares have almost tripled this year, making it the biggest gainer on the S&P 500 Index, thanks to excitement about original online drama series including "Arrested Development" and political thriller "House of Cards".

Netflix said on Monday it added 630,000 streaming customers in the United States in the second quarter, short of the average 700,000 expected by analysts. It had 29.8 million domestic subscribers at the end of June.

The shortfall against expected subscriber growth saw the stock fall as much as 11 percent in after-hours trading, although it made up some of the losses in pre-market trade on Tuesday.

"The stock was priced for perfection; hence the drop after hours," Evercore Partners said in a note to clients.

Cantor Fitzgerald downgraded its rating on Netflix stock to "hold" from "buy", but raised its target price by $30 citing longer-term growth prospects.

Unlike investors, many brokerages focused on the growth potential of the company and at least six raised their target price on Netflix stock by up to $36, to a high of $290.

Analysts said they were encouraged by Netflix's progress in building its own content, which has driven good viewership and a surge in profitable U.S. streaming growth.

Netflix said it saw a "small but noticeable bump," in subscribers from a new season of "Arrested Development," a quirky comedy about a broke California family.

Netflix has been pushing into original shows, trying to hook new viewers with shows they can't get elsewhere.

"We believe the overall trajectory of net adds remains strong and we're confident that originals (shows) will have a significant positive impact as they accumulate audiences and build brands associated with Netflix over time," JP Morgan analyst Doug Anmuth said in a note.

Netflix shook up Hollywood last week with 14 Emmy nominations for original series including "Arrested Development" and "House of Cards," the first Internet series to be nominated in major categories.

Netflix shares closed at $261.96 on the Nasdaq on Monday. (Reporting by Saqib Iqbal Ahmed; Editing by Rodney Joyce)