Netflix Stock Drops By 37% As Members Depart
A loss of subscribers translates naturally into a loss of revenue and investors can spot a loss in dividends from a mile away. This is the cold reality Netflix woke up to recently after its stock fell by 37% after news spread that over 850,000 subscribers left the service in Netflix’s third quarter of trading.
Netflix shares were trading at a modest $75 per share, a massive drop from the previous high recorded early in the summer. Analysts are not surprised that things have descended at the pace at which they have. Even Netflix’s own management kind of anticipated this fall out. The question now is what Netflix can do to avoid a further decline in its share price.
That answer is not one that will be easy to come by. The company released a statement recently acknowledging among other things, “that the price hike might have been too ambitious and caused Netflix to be perceived as greedy”. That statement was released in large part to placate shareholders, and more will have to be done to keep existing subscribers happy or even win back lost subscribers.
If Netflix is to keep pace with the strong revenue numbers enjoyed despite the price hike, management had better get busy. The $822 million in revenues is largely due to the subscriber numbers pre and mid-hike. The full impact of the hikes have now just started to take effect and so I wouldn’t be surpised if Netflix loses another 850,000 in the fourth quarter.
Is Netflix in free fall? Let us know what you think in the comments below.