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.
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.
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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