April 15, 2024

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Why is Netflix stock sinking today? It is not about sharing password or subscribers.

Why is Netflix stock sinking today?  It is not about sharing password or subscribers.

Worry that Netflix
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The crackdown on password sharing is malicious and is proven to be unfounded. As with concerns about the new ad-supported tier.

Netflix blew subscriber growth forecasts out of the water. The company missed Wall Street’s hopes for revenue and had slightly weaker-than-hoped guidance in the third quarter. But the 5.6% drop in shares in the pre-market Thursday, to $450.66, seems out of proportion if that’s why people are selling.

There could be some sudden pullback after the number of shares has more than doubled over the past year. Some investors may have decided to buy resulting in a sell profit on the news.

Benchmark analyst Matthew Harrigan identified the real problem before the earnings release. It has a sell rating on the stock, though it raised its price target to $293 from $250 on July 18th.

With so many competitors in streaming now, Netflix is ​​only as good as its content. Thus, the Hollywood writers and actors strike is a huge problem for the company, even if, as it turns out, it actually increases profits in the short term. Competitors also offer live sports and news, which Netflix doesn’t — at least not yet.

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“Even with Netflix’s advantages in terms of inventory of new content and more important overseas productions not subject to US labor shutdowns, it is conceivable that growth in 2024 could be dented by prolonged strikes,” Harrigan wrote. “The level of mutual inconsistency in commercial entertainment media is deteriorating.”

This is the problem for Netflix. Without new, unique programming, it doesn’t feel that special.

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Of course, other analysts disagree. Jeffrey Wlodarczak of Pivotal Research Group raised his price target for the stock from $535 to $600 after Wednesday’s earnings.

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“Netflix remains a very affordable, arguably underpriced entertainment product, and management has consistently demonstrated that it can successfully command the price,” he wrote in a note on Thursday. We recommend that investors take advantage of the pullback and add to positions.

Write to Brian Swint at [email protected]