Has Netflix Peaked?
by EG
Stranger Things might not be enough to save Netflix from an impending onslaught of competition. Last week the streamer reported disappointment subscriber growth figures, and investors weren't happy, especially since a horde of new streaming services with exciting content are about to enter the market. Read on for details.
Netflix's disappointing quarter reported last Wednesday has caused the streaming darling of Wall Street to shed more than $24 billion in value in six days as the stock has sunk 15 percent.
Shares of Netflix have now fallen each of the last nine trading days, as the stock began its downfall even before it released its quarterly financial report, which indicated it lost subscribers in the U.S. for the first time since launching its streaming service nearly a decade ago. Netflix also disclosed last Wednesday that it added just 2.7 million subscribers worldwide, while it had previously anticipated adding about 5 million in the quarter.
Netflix's largest fall in recent days came last Thursday when the stock dropped 10 percent, knocking $17 billion from its market capitalization. The stock closed Tuesday down $3.32 to $307.30, a price that leaves it with a market cap of $134.5 billion.
To be sure, longtime holders of Netflix stock have profited mightily as its shares have surged 3,300 percent in less than nine years, but analysts don't expect anything near that sort of return going forward, and the heavy volume of trading over the past nine days suggests many investors are cashing in on their big gains.
Was the "crack in the growth trajectory a soon-forgotten hiccup or sign of things to come?" asks Vijay Jayant of Evercore ISI. The analyst expects shares of Netflix to rebound to $380 sometime in 2020, but that's less than where they traded two weeks ago.
In January, Netflix raised its domestic prices by 13-18 percent, depending on the subscriber plan, and the increase is the presumed culprit for falling subs in the U.S. while revenue was not a problem during the quarter.
On the horizon, of course, is more competition coming from Disney, Apple, WarnerMedia, NBCUniversal and others, which will lead to Netflix having to create more of its own content as it loses access to a lot of third-party movies and TV shows, and Jayant says: "We continue to see the proliferation of new internet TV services as a bigger threat to Netflix's content costs than subscriber growth."
Get the rest of the story at The Hollywood Reporter.
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