Everyone makes mistakes. But this one, flagged in an SEC filing this morning, is notable because it’s so big and so important for investors who want to know whether the streaming video company is biting off more than it can chew financially as it expands overseas. Netflix says it corrected “a typographical error” that led it to report last week that its recently launched services in Latin America and the UK and Ireland “have contributed to a 14% increase in our content expenses in the International segment.” That claim appeared twice in the quarterly report. Both now have been changed to 348%. It’s a sore point, especially after Netflix’s credibility took a hit from its overoptimistic forecast that it would add 7M domestic streaming subscribers in 2012 — which it just reduced to about 5M. Susquehanna Financial Group’s Vasily Karasyov said last week that “it’s fair for investors to wonder” whether Netflix’s hopes for overseas growth “will also prove to be too optimistic.” Janney Capital Markets’ Tony Wible warned investors to watch international costs and Netflix’s “commitment to contain these costs.” And Wedbush Securities’ Michael Pachter said that if “content costs rise faster than we have modeled or growth stall sooner than we have modeled, we are prepared to lower our quite generous $45 price target.”
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