It’s worth considering that this decline may be attributed to reactionary selling following the stock’s more than doubled performance over the past year. Some investors may have chosen to capitalize on this surge leading up to the earnings announcement, intending to sell based on the news.
Even before the earnings report, Benchmark analyst Matthew Harrigan identified a fundamental issue. Despite increasing his price target for Netflix’s shares to $293 from $250 on July 18, he maintained his Sell rating. Harrigan highlighted the company’s vulnerability due to the ongoing strike among Hollywood writers and actors. Although this situation unexpectedly boosted profits in the short term, Netflix faces challenges from competitors who already offer live sports and news – an area where Netflix has yet to venture.
Harrigan expressed concerns about potential repercussions, stating, “Even with Netflix’s advantages in terms of new content inventory and substantial overseas production unaffected by the U.S. labor shutdown, extended strikes could dampen growth in 2024. The level of animosity within the entertainment trade industry is aggravating.”
Herein lies Netflix’s predicament. Without a continuous supply of fresh and innovative programming, it struggles to maintain its allure and uniqueness.
By Brian Swint