Netflix Stock Enters Bear Market As Stock Price Falls
For the first six months of 2018, Netflix stock was flying, in fact, Netflix share price doubled in the first six months of the year. At one point earlier this year, Netflix was even more valuable than Walt Disney Co. More recently, Netflix stock has been flagging.
July earnings report showed that Netflix could not deliver on investor predictions for earnings and global subscribers. Despite Netflix’s Q3 report showing improvement, many investors are still not sold. Because of this, Netflix shares have entered a bear market. A bear market is defined by a decline of 20% or more from a stock’s heights.
This week has been especially hard for tech stocks, mainly due to trade-war tariffs and weak Q3 reports.
Netflix Stock Analysis
For investors, a major concern with Netflix’s business model is the amount of money that the company spends on content. Netflix has spend around $8 billion on new documentaries, movies and tv series in 2018 alone. High spending on content is expected for any streaming service, especially when up against competitors like Hulu.
Currently, Netflix has 130 million subscribers and more room for growth. The spending part of Netflix’s business plan is expected, but when revenues are as low as $16 billion, investors start to worry.
This means that Netflix is spending over 50 percent of its sales on new content, with other expenses taken into consideration the margins get even tighter. For Netflix share price, this is detrimental because as margins tighten, investors sell. As interest rates climb, consumers will be watching their direct debit more than ever, so subscription plans are being scrutinized massively.
In terms of technical analysis, we can see that Netflix stock price is nearly 30% down from its high points. Meaning that it is bearish. If Netflix can hold at the $270 level, then it is likely that it will reach the $300 mark. If not then Netflix share price will need to be tested at the $250 price, if NFLX shares falls below this then investors have a real problem.
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