Netflix Shares Drop To Lowest Since 2012 As “Streaming Wars” Loom
Netflix is officially in the red for 2019 with shares dropping as much as 5.1% on Tuesday – its deepest quarterly decline since 2012 – erasing year-to-date gains which exceeded 43% as recently as May.
These losses come as upcoming streaming services from Disney and Apple come to market and add to the streaming giant’s slowing subscriber growth, on top of the rising costs related to creating premium TV shows like Stranger Things and The Crown.
“Apple Inc. and The Walt Disney Company will usher in a whole new world for streaming services in November and Netflix will face tough competition as consumer have a lot of choice, particularly with Amazon also building up its streaming services,” said Reed Hastings, Netflix CEO.
“I believe the key to success for Netflix will be adhering to its core strategy of offering primarily in-house binge content.”
Due to the growing competition and higher costs, Wall Street market analysts Pivotal Research slashed its price target for Netflix’s stock from $515 to $350, which was seen by analysts as the final push into negative territory for the streaming giant.
According to Bloomberg data, of the 45 analysts who cover Netflix, 31 recommended buying the stock, 10 said to hold, and only four said now is the time to sell.
“Our new forecasts imply they are going to respond to content cost acceleration by revving up their own content spend that will allow them to maintain their subscriber growth while pushing back profitability materially,” Pivotal analyst Jeffrey Wlodarczak wrote in a client note.
“Against this backdrop of accelerating industry spend, we believe the right move for Netflix is to materially accelerate their spend to maintain its sizeable content lead on its peers, increase barriers to entry, reduce churn and maintain growth in subscribers and average revenue per user.”
“In our view, solid subscriber growth – even with higher spend – could turn investor sentiment on a dime.”
Overall, Netflix’s stock has already lost 31% over the last 12 months, while one its major competitor Disney climbed up 17% over the same period.