Netflix shares fall near pre-pandemic level as investors fear slowing subscriber growth, competition

3 months ago

Scene from "Squid Game" by Netflix

Source: Netflix

Netflix has gone from airing "Squid Game" to becoming a subordinate successful it.

The streaming company's banal terms sank 6.6% arsenic of mid-day Monday, reaching arsenic debased arsenic $371.37. That follows Friday's 22% plunge, which was the steepest one-day driblet since July 2012.

Netflix shares are present down astir 47% from their grounds intraday precocious successful November and are trading astatine their lowest since April 2020, erstwhile Covid-19 was successful the aboriginal days of shutting down the U.S. economy. The driblet has been truthful precipitous, it's astir arsenic if the pandemic ne'er happened for Netflix investors.

Of course, Netflix's concern boomed successful 2020 and done overmuch of past twelvemonth arsenic radical were stuck astatine location successful quarantines. The institution added more than 36 million subscribers successful 2020 and 18.2 cardinal successful 2021.

The banal pushed past $700 to a grounds connected Nov. 19, 2 months aft Netflix released "Squid Game," the South Korean enactment amusement that became the company's biggest bid ever. The amusement follows fictional contestants competing successful a bid of children's games successful the hopes of winning wealth truthful they tin wage disconnected their debts. Contestants are killed if they suffer a game.

The astonishment popularity of "Squid Game" apt contributed to Netflix's banal surge, but it hasn't been capable to assistance it debar an ensuing bloodbath.

With investors already rotating retired of the large stay-at-home winners, Netflix further spooked the marketplace past week successful its fourth-quarter net report. The institution said it expects to adhd conscionable 2.5 cardinal subscribers successful the archetypal quarter, acold beneath the 6.93 cardinal that analysts expected, according to StreetAccount estimates.

Media manufacture concerns

The economical reopening whitethorn not beryllium the lone happening stunting Netflix's growth.

In the past 2 years, each large media institution wholly reorganized its concern to seizure a portion of Netflix's surging value. Disney, AT&T's WarnerMedia, Comcast's NBCUniversal and ViacomCBS accelerated their displacement to streaming, overhauling their interior concern structures on the way, arsenic portion of a landgrab for cord cutters.

The pandemic didn't alteration the displacement to streaming — it conscionable hastened it. Millions of Americans cancel accepted wage TV each year. Focusing connected an unbundled streaming merchandise that allows consumers to ticker wherever and whenever they privation is simply a logical determination for immoderate media company. The manufacture followed Netflix's lead, and the institution is present acknowledging that contention is eating into its growth.

While Netflix's nonaccomplishment could beryllium viewed arsenic its competitors' gain, probe expert Michael Nathanson of MoffettNathanson has a dimmer perspective.

"We spot this Netflix 4th arsenic a worrying information constituent for the remainder of the streaming manufacture connected aggregate fronts," Nathanson, whose steadfast recommends holding Netflix shares, wrote successful a enactment to clients aft the report. "The sell-off successful Netflix's equity makes it overmuch harder to usage arsenic a bullish comp successful the media world."

In different words, if Netflix is present valued astatine $350 per share, should investors successful Disney, ViacomCBS and Discovery besides revalue those companies? That's what appears to beryllium happening. Disney shares are down 11% since Netflix announced its fourth-quarter earnings, portion shares of ViacomCBS person fallen much than 8%.

Investment steadfast Jefferies downgraded Netflix connected Monday and suggested the institution see shifting its absorption from streaming to video games truthful it tin connection a caller maturation communicative to reinvigorate shareholders. Netflix co-founder and co-CEO Reed Hastings said connected the net telephone that helium wants Netflix to beryllium a satellite person successful gaming.

If that sounds excessively extreme, "Stranger Things" person happened.

Disclosure: Comcast's NBCUniversal is the genitor institution of CNBC.

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