Markets

Why Netflix, Inc. Fell 10.2% in September

NFLX Chart

NFLX data by YCharts .

What: Shares of Netflix fell 10.2% in September, according to data from S&P Capital IQ . The stock has still more than doubled in 2015, but also trades nearly 18% below the all-time highs it set as recently as early August.

What gives?

So what: At the start of September, Netflix saw a flurry of digital video moves from a plethora of major rivals. Hulu started an ad-free premium service with a premium monthly price tag. Amazon.com gave its Prime Video subscribers the option of downloading video files for later consumption -- a move Netflix CEO Reed Hastings has sworn off entirely. Finally, the rumor mill churned out reports that Apple would finally dip its ginormous toes into the subscription video service market with a Netflix-style service all its own.

It didn't help that Netflix let a long-standing content relationship expire at the end of the month, or that the markets in general suffered from from jitters about the situation in China. When everything is under the economic gun, highfliers like Netflix often sink faster than the rest.

Call it a perfect storm, if you will. It's almost a wonder that Netflix shares didn't fall a lot further than 10% in September.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

And with financial debt of just 1.5 times trailing EBITDA profits, Eros compares well with stateside rivals at 3.4 times EBITDA, or , whose ratio stands at 2.8. Lions Gate and CBS are also increasing their effective debt load, while Eros is reducing its own.

Now what:

Other services, from Hulu to Amazon Prime and beyond, will continue to pose significant threats to the Netflix model. However, none of them are expanding overseas with the confident authority Netflix is showing. They also fail to match Netflix's market-defining popularity in the crucial domestic market. In other words, the competitive landscape is much as it always was: mottled, potentially brutal, and not currently killing Netflix.

In fact, Netflix's rivals are probably more numerous than you think. In a conference held mid-month, Hastings reminded investors that Netflix actually competes with "everything you do to relax."

That widens the field quite a bit.

"We compete with video gaming, we compete with drinking a bottle of wine -- that's a tough one!" Hastings said. "We compete with other video networks, with playing board games. ... Think of any night you did not watch Netflix. That, what you did, that was the competition!"

So, Netflix knows that it's up against a tough slate of rivals. September didn't really change that.

At the start of the month, I said September would be a great time to buy Netflix shares . That recommendation still holds, just with an even greater discount. That picture might change in a couple of weeks, when Netflix reports its third-quarter results. But for now, it's still a great company trading at a seemingly temporary discount.

3 Companies Poised to Explode When Cable Dies

Cable is dying. And there are three stocks that are poised to explode when this faltering $2.2 trillion industry finally bites the dust. Just like newspaper publishers, telephone utilities, stockbrokers, record companies, bookstores, travel agencies, and big box retailers did when the Internet swept away their business models. And when cable falters, you don't want to miss out on these three companies that are positioned to benefit. Click here for their names. Hint: They're not the ones you'd think!

The article Why Netflix, Inc. Fell 10.2% in September originally appeared on Fool.com.

Anders Bylund owns shares of NFLX. Anders Bylund has the following options: short January 2016 $320 puts on AMZN and long January 2016 $320 calls on AMZN.The Motley Fool owns shares of and recommends AMZN, AAPL, and NFLX.Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

NFLX

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More