Netflix Loses $24 Billion In Value In Under A Week
Officials at Netflix were no doubt already feeling some pressure from other upcoming streaming services and things only seem to be getting worse as the company lost a whopping $24 billion in value in just six days.
Last week, Netflix reported its earnings and revealed it added only 2.7 million subscribers in the most recent quarter, a drastic amount less than the 5 million it had forecast.
The company lost US subscribers for the first time since launching its streaming product, meaning the entirety of its gain came from international territories.
As a result, the stock for the company dropped over 10 points per share down to $325.21 by the end of trading on Thursday (July 18), meaning Netflix lost upwards of $17 billion in market value in one day.
However, although the largest fall took place on Thursday, according to The Hollywood Reporter the company’s stock began its downfall even before the report was announced and shares of Netflix have fallen for each of the last nine trading days, presumably as investors started cashing in on their big gains.
By Tuesday (July 23), six days after announcing the report, the stock closed down $3.32 to $307.30, a price that leaves Netflix with a market cap of $134.5 billion. So far, its value has dropped by 15 per cent.
Some experts think Netflix’s stock might rebound as the initial investor exodus tapers off, climbing back to a value of around $380 in 2020, though that would still be a significant decrease from the company’s pre-report value.
In a letter to the shareholders shared after the company reported its numbers, Netflix CEO Reed Hastings suggested the exodus of consumers was down to rising prices and the fact the company had weaker content offerings in the first quarter of their fiscal year.
The letter read:
Our missed forecast was across all regions, but slightly more so in regions with price increases.
We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region).
Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized.
In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well.
The weak subscriber additions may be concerning for the company as they have occurred ahead of the launch of competing streaming services from Disney and WarnerMedia. Netflix is losing a number of its popular licensed series, like Friends and The Office, to competitors.
According to The Verge, on a call after the announcement of its earnings Netflix executives emphasised international markets, such as India, where subscriber growth is still healthy.
As the streaming service market becomes saturated it looks like Netflix will have to come up with some impressive content in order to buck the disturbing trend.
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CreditsThe Hollywood Reporter and 1 other
The Hollywood Reporter