NFLX Stock: Why The Price Fell Today

By Amit Chowdhry ● Oct 20, 2021
  • The stock price of Netflix Inc (NASDAQ: NFLX) fell by over 1.9% pre-market today. This is why it happened.

The stock price of Netflix Inc (NASDAQ: NFLX) fell by over 1.9% pre-market today. Investors were surprised by the stock price drop since the company reported better-than-expected subscriber growth for this past quarter and there are further gains expected in the fourth quarter.

In the past quarter, Netflix added 4.4 million net new subscribers. Now the company has a global total of 213.6 million subscribers. The new subscriber count is significantly higher than the forecast of 3.5 million. And Netflix is expecting to add another 8.5 million net new subscribers for the September quarter.

In terms of revenue, Netflix reported $7.48 billion for the third quarter — which is up 16.3% from a year ago. And the profits were $3.18 per share, which is well above analyst expectations.

For the next quarter, Netflix is expecting a revenue increase of 16.1% to $7.7 billion and profits at $0.80 per share. Revenue growth in the quarter was driven by 9% higher paid memberships and 7% higher average revenue per membership. The subscriber growth for the quarter was driven by 2.2 million net adds in the Asia Pacific and 1.8 million in Europe, the Middle East, and Africa (EMEA).

In terms of content, Netflix said that Squid Game is the most matched show ever. And 142 million member households viewed the show in the first four weeks after its release. And Squid Game ranks as the number 1 show on the service in 94 countries, including the U.S.

Assuming no new waves of COVID, Netflix is expecting a more “normalized content slate in 2022, with a greater number of originals in 2022 vs. 2021 and a release schedule that is more balanced over the course of the year, as compared to 2021.”

Going forward, Netflix is going to report on the hours of viewing instead of the number of households. And the company will report data on viewership more frequently.

“We think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction,” said Netflix in a statement. “It also matches how outside services measure TV viewing and gives proper credit to rewatching. In addition, we will start to release title metrics more regularly outside of our earnings report so our members and the industry can better measure success in the streaming world.”

One of the reasons why Netflix fell is due to a bearish report from Deutsche Bank. Deutsche Bank analyst Bryan Kraft downgraded Netflix to a “Hold” rating from a “Buy” rating with an unchanged price target of $590. Kraft had cited valuation for the downgrade following the Q3 results. 

And Kraft said that the 2021 and 2022 subscriber, revenue, EBITDA, and EBIT forecasts are essentially unchanged following Netflix’s slightly better-than-expected quarter. Plus Kraft believes that the expected Q4 subscriber beat is “already more than priced into the stock” and he believes that the company will start to trade on “profit metrics.”

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.