Netflix Loses US$17 Billion in Value in One Day

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Netflix CEO Reed Hastings

Netflix shed $17 billion in value on Thursday as Wall Street punished the leader in streaming media for announcing a day prior that it added only 2.7 million subscribers in the most recent quarter, far shy of the 5 million it had previously forecast.

In trading volume more than five times its daily average, the stock sunk 10 percent Thursday as analysts digested the news, which included the fact that Netflix lost U.S. subscribers for the first time since launching its streaming product, meaning that the entirety of its gain came from international territories.

Tuna Amobi of CFRA knocked $25 off of his 12-month price target to $400, while the stock closed Thursday at $325.15, down $37.29 for the day. He also cut his earnings estimates for both 2019 and 2020.

In a research note titled “Netflix: Doubters of the World Unite!,” Michael Nathanson of MoffettNathanson wrote, “While we have never doubted the quality of the Netflix product offering, we have recently had a hard time finding comfort in Netflix’s equity value.”

Nathanson’s target price is a lowly $220 on the stock, and on Thursday he slammed the discounted cash-flow models used by some analysts that look 10-15 years into the future as “bull shit.”

He said some bullish scenarios look “downright psychedelic,” considering that “U.S. subscriber adds turned negative on the back of $1 to $2 price hikes and an underwhelming content slate. This one quarter calls into question many of those 2025 endpoints.”

The weak subscriber additions are more concerning, considering they come prior to competition coming from Disney and WarnerMedia, both of which have streamers coming soon.

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