Netflix Down on Slowdown Forecasts By Evercore Analysts

Netflix Down on Slowdown Forecasts By Evercore Analysts
September 23, 2019


The shares of Netflix, Inc. (Nasdaq: NFLX) plunged 5.53% or $15.85 on Friday to close at $270.75 after Evercore analysts issued a note to clients that highlighted the streaming content provider’s struggle to lure global subscribers. Furthermore, Netflix CEO Reed Hastings, in an interview with Variety on Friday, acknowledged the high possibility of fierce competition from Disney and Apple, which are scheduled to begin their direct-to-consumer streaming services in November. So far in 2019, the stock has been lagging against its peers (Facebook, Apple, Amazon, and Google) in the tech space. The shares have lost 10% in a month and are down 30% from its peak.

Hastings acknowledged that competition would stiffen from November onwards as Apple will debut its Apple TV+ streaming service and Disney will be launching Disney+. With its ‘Peacock’ streaming service. NBCUniversal will also enter the fray a few months later. And that doesn’t end the long list of competitors. Netflix will also face competition from Hulu and Amazon’s Prime Video.

Pointing to NBCUniversal’s coming Peacock service, Hastings said: “While we’ve been competing with many people in the last decade, it’s a whole new world starting in November…between Apple launching and Disney launching, and of course Amazon’s ramping up. It’ll be tough competition. Direct-to-consumer [customers] will have a lot of choices.”

Hastings revealed that Netflix would continue to follow the same strategy of creating original content, despite facing fierce competition in that domain. Notably, Netflix lost to Amazon in its attempt to purchase the rights of the hit comedy series “Fleabag.”

In the UK, Netflix has spent over £400 million (~$500 million) in the past year and intends to spend more in the coming year.  In July, the company announced its intention to set up a production hub at Shepperton Studios, where Charlize Theron’s “The Old Guard” will be produced for Netflix and Skydance (a Santa Monica, California based company).

The CEO cautioned that production expenses would increase further from the current level due to the arrival of Disney Plus and AppleTV+. The company is also struggling to maintain the new subscriber addition rate. In its Q2 earnings report, Netflix divulged its international subscriber additions (net) were 2.80 million. Analysts had anticipated the figure to be around 4.80 million.

In order to trade at the current premium valuation, Netflix has to maintain global subscriber growth. This can be accomplished only by boosting content spending and debt. More importantly, Netflix has to succeed in India and Malaysia in order to achieve growth. Currently the US additions don’t matter much for Netflix as the stock trades on worldwide customer growth. Netflix, however, hopes to rebound in the third quarter, with subscriber additions of 6.20 million.

As of now, the stock will remain weak on concerns of competition from big tech companies.

Technically, the stock has broken below its 50-day moving average. The ultimate oscillator is also having a negative reading. As a result, we can expect the stock to move down in the short-term. The next major support is expected only near 240 levels.

nflx - technical analysis - 23rd Sept 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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