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Why Netflix, Inc. Shares Fell 13.8% Last Month

Close-up shot of hand holding TV remote, with a blurred screen in the distance.

What happened

Shares of Netflix (NASDAQ: NFLX) fell 13.8% in July 2018, according to data from S&P Global Market Intelligence . The streaming-video veteran may have delivered solid second-quarter earnings last month, but that didn't matter, as investors focused on soft subscriber additions instead.

So what

On July 15, Netflix's second-quarter report showed 40% year-over-year revenue growth and skyrocketing earnings. At the same time, Netflix added just 5.1 million net new subscribers on a global level, 1.1 million below management's guidance. Netflix shares fell more than 7% the next day .

And last week, the stock took another 5% dive on reports that retail giant Walmart (NYSE: WMT) is thinking about a streaming service of its own. This lower-priced platform would use licensed third-party content geared at a solidly middle-America type of audience. The company should reach a yea-or-nay decision by this fall, but some Netflix investors got spooked and walked away.

Close-up shot of hand holding TV remote, with a blurred screen in the distance.

Image source: Getty Images.

Now what

I would argue that the subscriber miss, while regrettable, was a small speed bump and a normal consequence of Netflix's management sharing their internal goals instead of setting up an easy-to-crush kind of target. As for the Walmart project, it looks like this could exist and carve out a reasonable niche for itself without stealing a whole lot of business from Netflix. I'd be more worried if Walmart came out with original production plans and a billion-dollar content budget, but that seems unlikely.

Long story short: Netflix looks like a solid buy after a month full of misguided haircuts.

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Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. 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.

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