Despite strong performance in the second half of last year, stock prices fell
likely affected by forecasts of slowing future growth trends
The stock price of the world's largest online video service (OTT) plummeted. Despite strong performance in the second half of last year, it appears to have been affected by forecasts that future growth may slow down.
On the 19th (local time) at the New York Stock Exchange, Netflix's stock closed at $555.04, down 9.09% from the previous session. This decline rate is the largest since July 20 last year (8.4%).
Thanks to strong performance in the second half of last year, Netflix's stock price steadily rose this year. On the 8th, it even reached an intraday high of $639.00, setting a new 52-week high, and until the day before, it had risen by 25%.
In its quarterly earnings announcement the day before, Netflix revealed that global subscribers increased by 9.33 million in the first quarter of this year, with subscriber numbers up 16%, revenue up 14.8%, and net profit up 78.7% compared to the same period last year. Subscriber numbers, revenue, and net profit all exceeded market expectations.
However, the future outlook and changes in performance indicators announced along with this are analyzed to have influenced the stock price decline. Netflix forecasted that subscriber growth in the second quarter of this year would decrease compared to the first quarter due to typical ‘seasonal factors.’
Additionally, starting from the first quarter of next year, Netflix announced it will no longer disclose subscriber numbers and Average Revenue per Member (ARM), which had been released quarterly as key performance indicators. It seems the company judged that subscriber numbers no longer represent its growth or potential, unlike in the early days of the business. This year, Netflix's ARM increased by only 1% compared to the same period last year.
Netflix explained, “In the early days when revenue or profit was almost nonexistent, an increase in membership was a strong indicator of potential,” adding, “Now, we generate significant revenue and free cash flow and are developing new revenue sources such as advertising, so membership is just one element of growth.”
U.S. media reported, “These factors have raised doubts about Netflix’s continued growth.” Bloomberg News reported, “Some Wall Street analysts are concerned that Netflix is trading at a valuation far exceeding the fundamentals of the business once again.”
There is also analysis suggesting recent signs that growth in the streaming market has reached saturation. Entertainment industry analyst Brandon Katz said, “Although Netflix has maintained a dominant market share, questions are now being raised about the company’s ultimate limits.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
