Tech stocks have been good to investors over the last decade. Without causing a repeat of the infamous dot.com bubble, they got big returns in the form of growth and dividends. However, in the last year or so the markets have shown signs of hardening against them and they got more volatile.
One area that was defying any volatility was that of streaming, with Netflix showing strong year-on-year growth defying any other struggling tech stocks. Not anymore.
The streaming service announced last week that it fell short of projected subscriber goals for the fourth quarter. No big deal, right?
Not only did it not hit new subscribers last quarter, it has also revised its estimate down from 4 million to 2.5 million this quarter. This points to one thing, and one thing only – stagnation. It had a goal of 222 million subscribers for 2021 It only just missed. However, almost everyone in North America, Canada and other key territories who is going to have Netflix has already got it. The markets are played out. There is limited growth left.
90% of the company’s subscriptions came from outside North America in 2021. This means if growth remains a goal then their focus will be elsewhere going forward.
Plus Disney+ is taking big bites out of the market with Marvel and Star Wars shows driving growth from respected IP. HBO Max is defying expectations and about to enter the game with DC content too. In short, Netflix’s easy ride is looking like it is over.
This is being felt in the markets as the 20%+ stock drop slashed the market capitalisation of the company by $50billion. Bad times for Netflix.
At the end of last week, the stock had plummeted from $508 to just under $400. This week doesn’t look any better as the price continues to fall as investors wait to see what happiness next.
Could be a bargain stock later today and then rally as opportunists pile in. Could continue to freefall. Don’t take the investment advice of some movie dudes on the internet!